Mortgage Dictionary -> Bankruptcy
You've gotten so many credit offers and have accumulated sizable debt. Combined with your mortgage and other costs of living, you're now overwhelmed and are unable to repay it in an appropriate manner. What's the solution for you? Well, it may or may not be bankruptcy. Whether you're in the United States or in Canada, you have the option of filing for bankruptcy. In this article, you will learn the bare essentials about bankruptcy and filing for it in both the US and Canada.
What is Bankruptcy?
If you've rung up so much debt that you cannot afford to repay it, you may file for bankruptcy. This is a legal admission of not being able to repay the debt. It can be turned down by the judge, particularly if the judge finds that you can afford to repay the debt. If granted bankruptcy, the debt is eliminated.
What Effect Does Bankruptcy Have on My Credit Score?
While bankruptcy does get rid of the debt, it does not make it go away. In fact, bankruptcy will be on your credit report for at least 10 years, which will pretty much eliminate your chances of getting any sort of loan or line of credit. It tanks your credit score.
Filing for Bankruptcy in the United States
As an individual, you can only file for what is known as Chapter 7 bankruptcy in the US. Under this bankruptcy, you must surrender your property in exchange for the removal of some or possibly all debt. This works because the bankruptcy trustee which the property is surrendered to sells the property and then disperses the money to the creditors. The only restriction on Chapter 7 is that it can only be filed once every 8 years.
Filing for Bankruptcy in Canada
Much like in the United States, bankruptcy in Canada is filed through the courts by individuals. The individual who files for bankruptcy agrees to give up their property in exchange for the debt being settled. In most cases, the sale of the estate covers the debt, but it may not if the debt is significant enough. Creditors in this case typically do not get the full amount of money owed to them, but rather, only some of it.