Why You Should Hire a Bankruptcy Attorney: A Comprehensive Guide
Facing bankruptcy is a daunting prospect. The overwhelming debt, the
If you are considering filing bankruptcy in the state of Maryland, you probably have many questions. The legal terminology can be confusing, and it might be challenging to anticipate how filing for bankruptcy will affect your life moving forward. The Phillips Law Offices have experience with Maryland bankruptcy cases and have helped many clients through the bankruptcy process. Consider these frequently asked questions, and if you do not see the answer to your question here, contact us at (301) 494-4250 for a consultation today.
Chapter 7 and Chapter 13 are the two main types of bankruptcy. Chapter 7 bankruptcy is intended for people who cannot pay their debts and need to receive a discharge for some or all of their debts to get a fresh start. In Chapter 7 bankruptcy, most of the petitioner’s assets are sold off to pay creditors.
Chapter 13 bankruptcy is for people who will be able to pay off their debts eventually but need time to organize their assets. People who file for Chapter 13 bankruptcy have three to five years to pay off their debt in accordance with a plan approved by the bankruptcy court.
A stay is an order by the bankruptcy court that prevents creditors from debt collection efforts during the bankruptcy proceedings. This order gives the judge time to decide which debts are dischargeable and allows the trustee to pay debts following the judge’s ruling.
When filing for bankruptcy, there may be some costs involved, such as filing fees and attorney’s fees. While the filing fees are low in Maryland, you should keep in mind that hiring an attorney sometimes costs more than filing yourself.
Adversary proceedings are court proceedings (that is, lawsuits) related to a bankruptcy case but are not actually part of the bankruptcy case itself. These proceedings could include objecting to a stay on collections or violations of a stay order.
Dischargeable debts are debts that the petitioner does not have to pay as a result of the bankruptcy process. Many types of debt are dischargeable in bankruptcy, including medical bills, house and car payments, credit card debt, and personal loan debt. However, not all debt is dischargeable, and the person who files for bankruptcy must still pay the debt that is not discharged after the bankruptcy process.
Each state has its own set of exemptions (things you can not lose in bankruptcy) and Maryland is no exception. Generally, you can lose investment homes, but your primary residence can be protected with proper legal advice. The Maryland property exemptions can be chosen or the Federal bankruptcy exemptions can be selected. Typically if your assets are in jeopardy of being liquidated, your attorney may advise you to file a Chapter 13 case, where you can retain more if you can afford to make a small monthly payment.
Most people can keep their house if it is not underwater (worth less than owed) and they continue to pay the mortgage during the process and there must also be no tax liens filed against them up until filing.
A trustee is appointed by the bankruptcy court to oversee the management and distribution of the assets of the person filing for bankruptcy. The trustee reviews the bankruptcy petition and documentation. In addition, this person can liquidate assets to make payments to creditors following a payment plan or the bankruptcy court’s ruling.
As part of the bankruptcy process, the filer will sell off or pay some of the assets they own in exchange for reducing or eliminating the debt they have to repay. This requirement to sell off assets to repay creditors does not end the moment someone files for bankruptcy. If someone who files for bankruptcy receives assets, such as an inheritance or a gift, within 180 days of filing bankruptcy, the assets are considered part of the estate. They can be distributed to creditors in the same way as if the filer possessed those assets at the time they filed for bankruptcy.
Not everyone is eligible to file for Chapter 7 bankruptcy. There is a means test that looks at the filer’s income and disposable income. If a filer has a high-income relative to the median income where they live, they might be unable to file.
In Maryland, if your monthly income is above $12,475, you would not be eligible for bankruptcy protection. The amount of debt is also a factor in determining a filer’s eligibility for bankruptcy protection. Even if someone cannot file for Chapter 7, they might still be able to file for Chapter 13 bankruptcy.
There is no lower legal limit to how much money you must owe to file for bankruptcy. However, bankruptcy has considerable long-term consequences for the filer’s financial future, as well as other financial costs like attorney’s fees. If the debt that you owe is relatively small, you may be better off pursuing other options, such as a loan or help from friends in the short term while trying to turn your finances around.
The effect of bankruptcy on your mortgage payments depends on which type of bankruptcy you file for. In Chapter 7 bankruptcy, your assets will be sold off to pay your creditors unless they fall under an exemption in Maryland bankruptcy law.
At the conclusion of the Chapter 7 bankruptcy process, you would either no longer have your house because the trustee sold it to repay creditors, or you would still have your mortgage and a small amount of equity in the house (see the exemptions in the next question). If you file for Chapter 13 bankruptcy, you will be able to keep your home, but you are also obligated to repay your debts over time. In this case, you would continue to make payments to your mortgage lender, and you would continue to own the house.
Maryland bankruptcy law allows debtors filing for bankruptcy to keep some of their assets and income sources during bankruptcy. Some forms of financial support include child support, alimony, pension benefits, and certain other funds listed in the bankruptcy code.
The petitioner filing for bankruptcy can keep up to $22,975 in property value for their home. As nearly all houses have values far higher than this value, a homeowner in Chapter 7 bankruptcy will typically not be able to keep their house unless they have a high mortgage and are not behind in payments. Homeowners are also allowed to keep personal property, cash, and tools for their businesses up to a predetermined value.
Your employer should not be able to fire you or negatively impact your employment as a result of you filing for bankruptcy. Bankruptcy courts do not inform employers when employees file for bankruptcy, so your employer is unlikely to know about the filing unless payments relating to bankruptcy or creditors are automatically deducted from your paycheck or if your employer is a creditor.
The effect on your spouse depends on whether the debts you have are individual or held jointly by you and your spouse. In the state of Maryland, if you and your spouse file jointly for bankruptcy, you will receive double the Maryland exemptions, which means more assets or property that creditors will not be able to take from you.
Student loan debt and tax obligations to federal and state governments, child support payments, and alimony payments are not dischargeable.
The amount of time that you need to wait before filing for bankruptcy a second time depends on which form of bankruptcy you filed for the first time. If you are filing for Chapter 7 bankruptcy both times, you will have to wait eight years. If you filed for Chapter 13 and are now filing for Chapter 7, you have to wait four years. Finally, if you filed for Chapter 7 bankruptcy and are now filing for Chapter 13 protection, you have to wait four years. Some exceptions apply to these limits.
Strictly speaking, you do not need an attorney to file for bankruptcy. However, the bankruptcy code is complex when it comes to federal law and state law. Bankruptcies involve the filing of potentially complex paperwork, attending a meeting of creditors, and making important decisions that affect what assets the petitioner will be able to keep and what debts are discharged after the bankruptcy process.
The petitioner will have to understand complex legal terms related to bankruptcy. Having someone knowledgeable on their side to advocate for them and guide them through the process is vitally important for the petitioner.
We strongly advise anyone who is considering filing for bankruptcy to consult with an attorney before they start the process. The filer’s actions before filing can influence what assets they get to keep and the debts that are discharged, so it is essential to plan ahead for the process.
To qualify filing Chapter 7 bankruptcy, you have to owe more unsecured debt than your property is worth after exemptions. There are some criteria a Trustee will use in determining your eligibility for filing Chapter 7 bankruptcy based on the amount of income they expect you to bring in each month. Although there is no specific amount of debt you can have to file a Chapter 7, if you want to keep a home or car that you are behind on payments, you may need to file a Chapter 13 to cure those secured debts.
A person can file for Chapter 13 bankruptcy if they have no more than $419,275 in unsecured debt and up to $1,257,850 worth of secured debts. This includes things like credit card bills or personal loans but does not include mortgages due on homes that are collateralized through equity lines of credits- these would be considered an asset under Federal Reserve guidelines rather then liability because you still get paid back even when filing chapter 7!
When filing for bankruptcy in Maryland, most people’s credit scores go down. This is partly because when declaring bankruptcy, there may already be foreclosure or repossession actions that were filed against them before filing. These bankruptcies stay on the credit report for around ten years after filing even if the action is dismissed
If filing Chapter 7 bankruptcy, filing for a new credit account within 1 year of filing will trigger the Trustee to revoke your discharge. You should also not pay any family members the debts you owe them with in 6 months to 1 year of filing for bankruptcy as it could be seen as an “insider payment”. You also should not incur any debt with the intent to never pay it back because you know you will file a bankruptcy. That type of conduct may be seen as fraud. You also should not transfer any property within 4 years prior to filing for bankruptcy unless you receive fair market value for that property. For example, do not sell a house for $1 to a friend or relative. That may give rise to a claim for a fraudulent transfer with the intent to hinder or delay a collection.
If you or someone you know is having trouble paying their bills and is considering bankruptcy in the state of Maryland, The Phillips Law Offices is ready to help. We understand that the decision to file for bankruptcy can be a difficult one.
We will work hard to guide you through the process, help you understand your rights and obligations, and advocate for you in bankruptcy court. Call 301-494-4250 for a consultation today.