Bankruptcy question

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Scrubb
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Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 5:10 am

Looking for personal experience here, or at least people here who have seen friends or family who declared personal bankruptcy. How did it work out for you/someone you know? How tough was it to function with the restrictions on credit afterwards? When the 7 year period was over, were they "back on their feet"?

I'm sure it's slightly different from country to country, but I imagine it's similar and has similar results.

In some ways it looks like a golden re-set button, I imagine. You're drowning in debt, you know that in 10 years no matter what you do you won't really be much/any further ahead than you are now because of the cost of servicing your debt; you have almost no assets so you don't lose much. But what are the long term downsides? Does it often turn out so that the person is in an ok place in 7 years?

Asking for a friend.

(Really.)
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Re: Bankruptcy question

Post by Lost Soul » Mon Feb 12, 2018 5:14 am

The US has the best bankruptcy laws on earth, because so many of the early immigrants were released from debtor's prison to get here.

Canadian laws are assuredly more onerous, but better than elsewhere in the usual fashion.

The rest of the world is still a giant wasteland.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 5:27 am

Have you seen people recovering from a bankruptcy?

One thing that isn't related to the questions I've asked, but is confusing, is that I always thought primary residences were exempted from the entire thing. But I googled for the appropriate province, and it says that if the person has any equity in their home, they have to pay that much as part of the bankruptcy. Difficult to see how they could raise that money without selling the house.
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Re: Bankruptcy question

Post by veronica_inheels » Mon Feb 12, 2018 5:35 am

I know a handful. I always say go for it. All of them recovered nicely.
7 years is a myth. You will be bombarded with credit cards offers in 12 months.
Bankrupted people are a tasty bite for the banks.
After all they don't owe anything.
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Re: Bankruptcy question

Post by veronica_inheels » Mon Feb 12, 2018 5:36 am

Scrubb wrote:
Mon Feb 12, 2018 5:27 am
Have you seen people recovering from a bankruptcy?

One thing that isn't related to the questions I've asked, but is confusing, is that I always thought primary residences were exempted from the entire thing. But I googled for the appropriate province, and it says that if the person has any equity in their home, they have to pay that much as part of the bankruptcy. Difficult to see how they could raise that money without selling the house.
Don't google, see a trustee. My friend bankrupted 80k and her condo and car wasn't touched.
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Re: Bankruptcy question

Post by Lost Soul » Mon Feb 12, 2018 5:41 am

Scrubb wrote:
Mon Feb 12, 2018 5:27 am
Have you seen people recovering from a bankruptcy?

One thing that isn't related to the questions I've asked, but is confusing, is that I always thought primary residences were exempted from the entire thing. But I googled for the appropriate province, and it says that if the person has any equity in their home, they have to pay that much as part of the bankruptcy. Difficult to see how they could raise that money without selling the house.
Like I said, Canada is more onerous. In the US, most states allow you to keep your house in BK. Some people buy mansions right before they declare, especially if they have access to outside sources of money like from a trust or a spouse. The equity of your primary residence is untouchable, except by (local) property taxes.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 5:43 am

Yes, they'd definitely see a trustee and make sure of exactly what's required.

There's also an option called a "consumer proposal" where they negotiate what percentage of their debt they'll pay and the rest of it is waived. A payment program for between 3 and 5 years is set up and when the payments are finished, the creditors accept they're not getting anything else. Apparently creditors will go for that because the alternative is that they won't get anything because the person will go bankrupt. The person gets a bad credit rating, but not as bad as a bankruptcy credit rating, and it is removed quicker.

But if, as you say vron, the credit rating doesn't actually mean anything anyway, maybe there's no real advantage, and they'd actually have to pay some of the debt so it's worse.
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Re: Bankruptcy question

Post by northern_goddess » Mon Feb 12, 2018 5:45 am

veronica_inheels wrote:
Mon Feb 12, 2018 5:35 am
I know a handful. I always say go for it. All of them recovered nicely.
7 years is a myth. You will be bombarded with credit cards offers in 12 months.
Bankrupted people are a tasty bite for the banks.
After all they don't owe anything.
I know 2 people who have declared bankruptcy in Canada and basically I would echo what Vron has said. They both recovered nicely and neither had to wait 7 years for anything. I'm not sure about one of them but I know the other one got a self-loading credit card within days/weeks and in less than a year had a few thousand dollars of credit on it (not needing to pre-load it first).
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Re: Bankruptcy question

Post by Lost Soul » Mon Feb 12, 2018 5:49 am

The CR means a lot, for people and for companies. You never get off scot free from welching on your debts here, unless you lay low for seven years.

I wish I could pull an Irish and English epithet into the meme but alas, I am flummoxed.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 5:51 am

northern_goddess wrote:
Mon Feb 12, 2018 5:45 am
veronica_inheels wrote:
Mon Feb 12, 2018 5:35 am
I know a handful. I always say go for it. All of them recovered nicely.
7 years is a myth. You will be bombarded with credit cards offers in 12 months.
Bankrupted people are a tasty bite for the banks.
After all they don't owe anything.
I know 2 people who have declared bankruptcy in Canada and basically I would echo what Vron has said. They both recovered nicely and neither had to wait 7 years for anything. I'm not sure about one of them but I know the other one got a self-loading credit card within days/weeks and in less than a year had a few thousand dollars of credit on it (not needing to pre-load it first).
Ok, thanks, that's very interesting.

The house is pretty key. Gotta confirm how they can keep the house.
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Re: Bankruptcy question

Post by nycfellow » Mon Feb 12, 2018 5:52 am

The laws, even inside the US, vary from state to state, in particular as regards the primary residence. I'm very hesitant to provide any Canadian advice as almost everything I know pertains to US law.

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Re: Bankruptcy question

Post by madmonday » Mon Feb 12, 2018 6:07 am

In a practical sense the few I have known, all worked harder and smarter and some went back and paid off the original debt....Australians are good like that.
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Re: Bankruptcy question

Post by andybox » Mon Feb 12, 2018 6:14 am

Wow. As far as I know, bankruptcy here means you sell your house to pay creditors. Not sure about a car.

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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 6:14 am

nycfellow wrote:
Mon Feb 12, 2018 5:52 am
The laws, even inside the US, vary from state to state, in particular as regards the primary residence. I'm very hesitant to provide any Canadian advice as almost everything I know pertains to US law.
Yeah, I realize that. So I wasn't asking if it's a good idea, exactly, I was asking if people had seen friends or family recover from bankruptcy, and if they found it worked out ok in the end. Or if, on the other hand, they found it so onerous to get past that they weren't really any further ahead than they would have been.

So far, it seems like it can be a good solution.

Of course the details for our specific province will be key, though. If they can't keep the primary residence, that will likely be a deciding factor.
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Re: Bankruptcy question

Post by Flobster! » Mon Feb 12, 2018 6:20 am

I think in Oz - well, Victoria - some of the terms of each bankruptcy are decided individually. I don't think you have to sell your residence but it might be an option they have up their sleeve.

The one bankrupt I've known was not allowed to keep a car valued at over x dollars, but he did anyway. I don't know if he transferred the registration to someone else.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 6:24 am

There's also a side issue in that there is a personal debt involved that they don't want to renege on (i.e., they borrowed from a friend) so are trying to figure out how to structure things so that they can still pay that off somehow. It does make it more complicated.
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Re: Bankruptcy question

Post by dBrother » Mon Feb 12, 2018 8:25 am

Wouldn't it make more sense to get into even more debt, as much debt as possible, convert debt to cash, buy gLod with it, bury said gLod in some close and trusted reloes back yard, then go into bankruptcy?..

Convert gLod back to cash when no one is looking later on, you could even buy glLod in the form of Alaskan river worn nuggets and say you found them a few years hence...
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Re: Bankruptcy question

Post by nycfellow » Mon Feb 12, 2018 2:16 pm

People probably don't go bankrupt enough. The only real cost is limited access to credit for a few years.

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Re: Bankruptcy question

Post by polardude1 » Mon Feb 12, 2018 6:03 pm

The US has the best bankruptcy laws on earth
it must be easy, Trump's businesses declared bankruptcy 3 X :lol: :lol:
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Re: Bankruptcy question

Post by leela » Mon Feb 12, 2018 6:05 pm

nycfellow wrote:
Mon Feb 12, 2018 2:16 pm
People probably don't go bankrupt enough. The only real cost is limited access to credit for a few years.
The cost to their creditors, on the other hand...
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Re: Bankruptcy question

Post by cowtown » Mon Feb 12, 2018 6:07 pm

So, Scrubb has developed an opioid addiction and has pilled her way down to junkie town
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Re: Bankruptcy question

Post by shilgia » Mon Feb 12, 2018 6:20 pm

Myanmarbound has posted about this, but he isn't around anymore. Are you friends with him on Facebook?

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Re: Bankruptcy question

Post by Iolar » Mon Feb 12, 2018 7:15 pm

leela wrote:
Mon Feb 12, 2018 6:05 pm
nycfellow wrote:
Mon Feb 12, 2018 2:16 pm
People probably don't go bankrupt enough. The only real cost is limited access to credit for a few years.
The cost to their creditors, on the other hand...
Assuming that their creditors are credit institutions, defaults are a cost of doing business. Provision is made for a certain percentage of loans being defaulted on. Choosing to default is a legitimate financial decision - morality should not be a consideration.
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Re: Bankruptcy question

Post by veronica_inheels » Mon Feb 12, 2018 7:16 pm

leela wrote:
Mon Feb 12, 2018 6:05 pm
nycfellow wrote:
Mon Feb 12, 2018 2:16 pm
People probably don't go bankrupt enough. The only real cost is limited access to credit for a few years.
The cost to their creditors, on the other hand...

not a lender nor a borrower be

being a christian, i have zero sympathy for lenders.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 7:16 pm

cowtown wrote:
Mon Feb 12, 2018 6:07 pm
So, Scrubb has developed an opioid addiction and has pilled her way down to junkie town
You caught me.

Yes, shilgia, I was thinking of him - I might message him on FB.
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Re: Bankruptcy question

Post by leela » Mon Feb 12, 2018 7:19 pm

Not much fun when you're an ordinary person though, iolar. My mum is £50k down on two ill-advised loans to 'friends' who then went bankrupt. They went on to start another business, but hey, no need to consider the person they owed from the last one.
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Re: Bankruptcy question

Post by veronica_inheels » Mon Feb 12, 2018 7:20 pm

if you borrow from friends, you should get more credit from banks, pay your buddies and then bankrupt everything.

or bankrupt and pay your friends anyways.
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Re: Bankruptcy question

Post by Klara » Mon Feb 12, 2018 9:57 pm

I don't know anyone who's bankrupted. I'm trying to imagine a situation that would make me go that far but I'm stuck in my bubble again.

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Re: Bankruptcy question

Post by nycfellow » Mon Feb 12, 2018 10:09 pm

The US does indeed have the world's best bankruptcy law. It's remarkable how many places don't have the equivalent of Chapter 11 bankruptcy.

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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 10:11 pm

veronica_inheels wrote:
Mon Feb 12, 2018 7:20 pm
or bankrupt and pay your friends anyways.
YEah, they're thinking of doing it this way.

Looking at options to figure out which one would get them back into ok shape soonest. They've figured out that keeping going the way they are now is never going to get them out of debt. I just did a quick calculation, and I am absolutely blown away - I can't see any way that their debt would not increase over the next year, no matter what they do.
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Re: Bankruptcy question

Post by Wilster » Mon Feb 12, 2018 10:12 pm

leela wrote:
Mon Feb 12, 2018 7:19 pm
Not much fun when you're an ordinary person though, iolar. My mum is £50k down on two ill-advised loans to 'friends' who then went bankrupt. They went on to start another business, but hey, no need to consider the person they owed from the last one.
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Re: Bankruptcy question

Post by leela » Mon Feb 12, 2018 10:18 pm

It's a good quote. But not really germane to my mum's mistake. She was naive and thought she was doing something helpful when their business was struggling.
in the same situation, I'd go with "If a bank doesn't think you can pay it back, then why should I believe you can?"
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Re: Bankruptcy question

Post by shilgia » Mon Feb 12, 2018 10:18 pm

Scrubb wrote:
Mon Feb 12, 2018 10:11 pm
veronica_inheels wrote:
Mon Feb 12, 2018 7:20 pm
or bankrupt and pay your friends anyways.
YEah, they're thinking of doing it this way.
It is essential that they seek legal advice before they attempt any of this. Paying a friend today, then filing for bankruptcy tomorrow virtually guarantees that the friend will be asked (and if they refuse, sued) to return the payment to the bankruptcy estate.

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Re: Bankruptcy question

Post by DCComic » Mon Feb 12, 2018 10:45 pm

The people who get shafted aren't necessarily lenders. How about the guy who fixed your car and the cheque bounced, or the woman who minds your kids, or the vet, or the builder....
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Re: Bankruptcy question

Post by DCComic » Mon Feb 12, 2018 10:47 pm

leela wrote:
Mon Feb 12, 2018 7:19 pm
Not much fun when you're an ordinary person though, iolar. My mum is £50k down on two ill-advised loans to 'friends' who then went bankrupt. They went on to start another business, but hey, no need to consider the person they owed from the last one.
That.
it's a filthy business for liars and cheats.
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Re: Bankruptcy question

Post by leela » Mon Feb 12, 2018 10:51 pm

DCComic wrote:
Mon Feb 12, 2018 10:47 pm
leela wrote:
Mon Feb 12, 2018 7:19 pm
Not much fun when you're an ordinary person though, iolar. My mum is £50k down on two ill-advised loans to 'friends' who then went bankrupt. They went on to start another business, but hey, no need to consider the person they owed from the last one.
That.
it's a filthy business for liars and cheats.
That's how I tend to see it. Simply a way to avoid paying your debts. And it's generally the small person that gets shafted.
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Re: Bankruptcy question

Post by Scrubb » Mon Feb 12, 2018 11:07 pm

shilgia wrote:
Mon Feb 12, 2018 10:18 pm
Scrubb wrote:
Mon Feb 12, 2018 10:11 pm
veronica_inheels wrote:
Mon Feb 12, 2018 7:20 pm
or bankrupt and pay your friends anyways.
YEah, they're thinking of doing it this way.
It is essential that they seek legal advice before they attempt any of this. Paying a friend today, then filing for bankruptcy tomorrow virtually guarantees that the friend will be asked (and if they refuse, sued) to return the payment to the bankruptcy estate.
Oh, absolutely they're getting legal advice before anything.

It would be more like they'd pay back the friend after declaring bankruptcy - I think it looks like they'd have to make payments for 9 months (or something like) that during the process, including any income over a certain amount. But after the process is finished, they can start spending their income however they want to, and they'd start paying their friend back.
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Re: Bankruptcy question

Post by Logg » Mon Feb 12, 2018 11:14 pm

The only two people I know who declared bankruptcy did it to get out of credit card debt; there were no friends getting shafted. In fact, one of those people may have just defaulted on the debt rather than declaring. It was for unexpected medical bills by the way.

In both cases, neither person felt too good about it immediately afterwards.

For some people, there might be a stigma around it; can people find out if you declared bankruptcy with a simple google search?

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Re: Bankruptcy question

Post by Iolar » Tue Feb 13, 2018 12:08 am

DCComic wrote:
Mon Feb 12, 2018 10:47 pm
leela wrote:
Mon Feb 12, 2018 7:19 pm
Not much fun when you're an ordinary person though, iolar. My mum is £50k down on two ill-advised loans to 'friends' who then went bankrupt. They went on to start another business, but hey, no need to consider the person they owed from the last one.
That.
it's a filthy business for liars and cheats.
My business has had debtors default on debts several times. Last year, we were owed around €40k by a pub that went out of business. It's a commercial reality. It's not personal. Yeah, it's really shit when it happens, but usually the promoters of such a business are struggling to pay off Revenue and credit institutions which I'm sure isn't pleasant situation.

I'm an ordinary person who's been affected by defaulters (my drawings were lower as a direct consequence), but if I were in a similar situation, I'd move to the UK (where bankruptcy is more streamlined) and default on everyone I'm indebted to - without hesitation.
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Re: Bankruptcy question

Post by GLimpet » Tue Feb 13, 2018 12:25 am

That's happened to the business I work for.

Once it was an Israeli company, independent gas prospector but a Russian drilling contractor I trusted vouched for them. Sent the equipment, did the job, equipment came back like new, then I heard rumours they were in trouble so I phoned the CEO about our $100k bill. I'll always remember his words, "GLimpet, we are in a big shit"

I said if he wanted to go back into the oil and gas business he'd better pay or nobody will ever supply him anything again.

However he sent an agreement that he'd pay us of we agreed to 30% discount, which I did on Friday ( a weekend day in Israel) and he paid on Monday.

I called Vlad the drilling contractor a couple of years later to see what he was up to and he said, "you were lucky. They still owe us $5m"

Then I lost the company $100k on a job in Georgia. They said they would repay creditors from sale of assets, which was unlikely during a slump. We've written it off but that was a sore one.

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Re: Bankruptcy question

Post by Boinkity_Boink » Tue Feb 13, 2018 7:06 am

I have a friend from high school that started an IT company in the late 1990s. It went belly up and he owed $280,000, which he said was 7x his annual salary (do the math). He said it was alright, except that when he was listing his debts that were going to get wiped, he forgot to list one debt for $40,000, which remained on the books. Just because he had so much paper and crap on the the floor of his office.

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Re: Bankruptcy question

Post by Flora » Tue Feb 13, 2018 7:28 am

My friend was heavily in debt (for stupid personal finance mismanagement reasons), and wanted to sell her house to cover it. After a year she couldn't sell it - it was grade 1 listed, this was 2008. So she went bankrupt and the albatross house plus debt were dealt with. She's rented ever since, but doesn't regret it.

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Re: Bankruptcy question

Post by Godjira » Tue Feb 13, 2018 8:24 am

Found this on Tokyo:

Should an individual file for personal bankruptcy in Tokyo, the Tokyo District Court appoints a trustee to manage the affairs of the bankrupt person for the benefit of the creditors. The trustee takes control over the bankrupt person’s bank account and personal assets except for small amounts. The home is sold-off to a third-party. He or she may keep any furniture along with 3 months living expenses equivalent to about $10,000. Also free from seizure are the individual’s private car and life insurance policy where the cumulative value does not exceed about $2,000.
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Re: Bankruptcy question

Post by Troll_Handle » Tue Feb 13, 2018 9:17 am

The UK has another option, Individual Voluntary Agreements ("IVA") where an insolvency practitioner will help negotiate down the value of the loans and interest to something affordable. If that exists in Canada then an insolvency practitioner can examine it as an option. In those cases, the person usually keeps their home and a cheap car if it's needed; the credit score impact is lower and goes in 5 years. Creditors get less, but top creditors get something. All debts must be declared.

While it's sometimes necessary to draw a line under debts and balance the books as far as possible, I get very judgemental about people defaulting on debts so I won't say more. Certainly any bankrupt who goes on to make money and doesn't repay that debt (e.g. Trump) is simply playing a long game of theft.

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Re: Bankruptcy question

Post by shilgia » Tue Feb 13, 2018 6:28 pm

Godjira wrote:
Tue Feb 13, 2018 8:24 am
Found this on Tokyo:

Should an individual file for personal bankruptcy in Tokyo, the Tokyo District Court appoints a trustee to manage the affairs of the bankrupt person for the benefit of the creditors. The trustee takes control over the bankrupt person’s bank account and personal assets except for small amounts. The home is sold-off to a third-party. He or she may keep any furniture along with 3 months living expenses equivalent to about $10,000. Also free from seizure are the individual’s private car and life insurance policy where the cumulative value does not exceed about $2,000.
Interesting. So can you, just before filing for bankruptcy, take out a new loan for a really expensive car, buy the car? Then file for bankruptcy, get to keep the car. Then sell the car?

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Re: Bankruptcy question

Post by DCComic » Tue Feb 13, 2018 6:48 pm

shilgia wrote:
Tue Feb 13, 2018 6:28 pm
Godjira wrote:
Tue Feb 13, 2018 8:24 am
Found this on Tokyo:

Should an individual file for personal bankruptcy in Tokyo, the Tokyo District Court appoints a trustee to manage the affairs of the bankrupt person for the benefit of the creditors. The trustee takes control over the bankrupt person’s bank account and personal assets except for small amounts. The home is sold-off to a third-party. He or she may keep any furniture along with 3 months living expenses equivalent to about $10,000. Also free from seizure are the individual’s private car and life insurance policy where the cumulative value does not exceed about $2,000.
Interesting. So can you, just before filing for bankruptcy, take out a new loan for a really expensive car, buy the car? Then file for bankruptcy, get to keep the car. Then sell the car?

I read that as the cumulative value of the car and the life insurance policy not exceeding $2000 because the cumulative value of a single item doesn't make much sense.
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shilgia
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Re: Bankruptcy question

Post by shilgia » Tue Feb 13, 2018 6:51 pm

That could be. I read it to mean the cumulative value of life insurance policies.

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Scrubb
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Re: Bankruptcy question

Post by Scrubb » Tue Feb 13, 2018 7:54 pm

Troll_Handle wrote:
Tue Feb 13, 2018 9:17 am
The UK has another option, Individual Voluntary Agreements ("IVA") where an insolvency practitioner will help negotiate down the value of the loans and interest to something affordable. If that exists in Canada then an insolvency practitioner can examine it as an option. In those cases, the person usually keeps their home and a cheap car if it's needed; the credit score impact is lower and goes in 5 years. Creditors get less, but top creditors get something. All debts must be declared.
That sounds like what I mentioned earlier - a consumer proposal
There's also an option called a "consumer proposal" where they negotiate what percentage of their debt they'll pay and the rest of it is, and interest, is waived. A payment program for between 3 and 5 years is set up and when the payments are finished, the creditors accept they're not getting anything else. Apparently creditors will go for that because the alternative is that they won't get anything because the person will go bankrupt. The person gets a bad credit rating, but not as bad as a bankruptcy credit rating, and it is removed quicker.
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Troll_Handle
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Re: Bankruptcy question

Post by Troll_Handle » Tue Feb 13, 2018 8:04 pm

Ok good. Well again UK, but an insolvency practitioner is obliged under the financial code of conduct to check the impact of each option. They have to run through questions and confirm if a consolidated loan, IVA or bankruptcy would lead to the best outcome for the client. So I suggest your friend finds an insolvency practitioner that deals with consumer proposals and gets info from them.

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Re: Bankruptcy question

Post by Scrubb » Tue Feb 13, 2018 8:19 pm

The rule is about the same here. They are going to someone this week (I don't know what the person is called) for a consultation. I don't think this consultation is where they figure out exactly what is the best option and go with it; more like the consultant will lay out the conditions for each option really clearly and make a recommendation based on their full disclosure of finances. Then they'd have to deal with either a bankruptcy specialist or a consumer proposal specialist to set up the terms/payments.

They did try to figure out if they could manage to pay off their debt if they budgeted extremely strictly, and the answer is "not really". They'd still be trying to tread water in a decade. The interest is just overwhelming.
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