Chapter 13 Bankruptcy

Chapter 13 Bankruptcy is often referred to as a ‘reorganization’ bankruptcy. It differs from Chapter 7 in that you aren’t liquidating your assets to pay your debts. Chapter 7 bankruptcy is designed for those who don’t have enough income to pay their debts, whereas Chapter 13 allows you to pay back your debts in a period of time under a court-ordered plan.

Maryland Chapter 13 Bankruptcy

Bankruptcy laws help people who are struggling to pay their debts and can even stop a foreclosure and tax levy by allowing them to reorganize their finances through a Chapter 13 bankruptcy case.  Once you file a bankruptcy case, the court forbids the creditors from continued collection efforts. You will also get relief from collection agencies and their barrage of phone calls and letters.

Chapter 13 bankruptcy is a federal court process designed to reorganize your finances and deal with all your debts. The court will appoint a trustee who will oversee your court-approved plan to repay your creditors. Under a Chapter 13 plan, some debts will be repaid completely, some will be partly repaid, and other debts will be eliminated. If you are successful, after the 3-5-year plan is completed, the court will discharge (eliminate) any remaining debts. 

Chapter 13 allows debtors to repay the full amount of the arrears owed to secured debts they have fallen behind and desire to keep through a 3-5 years under a Chapter 13 Plan approved by a court.  If a filer only has unsecured debts, like credit cards, personal loans, utilities or any other type of debt not secured by property, a Chapter 13 allows the filer to pay back only what they can afford, based on their income and household expenses.  The help of an experienced bankruptcy lawyer can really help designing a Chapter 13 Plan that works for all your financial circumstances.

The most common unsecured debts discharged in a Chapter 13 proceeding are medical bills, credit card debt, and personal loans. There are several issues that typically can arise in a Chapter 13 bankruptcy case brought by creditors, such as motions to lift the bankruptcy protection, or to dismiss a case.  Again, for this reason, retaining the help of a lawyer is advised in this more complex process. 

To get a Chapter 13 Plan approved by the court which is known as being confirmed, the filer must propose a payment based on what they can afford and demonstrate why that payment is proper.  If the court accepts your repayment plan, you simply need to make your monthly payments and stay current on any secured payments like mortgage and car loans.

Maryland Means Test and the Chapter 13 Eligibility

Unfortunately, people have abused chapter 13-bankruptcy privileges in the past, and that is why the Federal government and the State of Maryland has strict guidelines as measures to ensure only the right people with proper Chapter 13 Plans get access to this type of debt relief. The question of who is right or not to file a particular type of bankruptcy lies entirely on the individual case, including the amount of debt and type of debt as well as the household income and expenses. Generally, below are some of the instances or cases where you can file for a Chapter 13 bankruptcy.
Commonly known as the means test in Chapter 7, or the Maryland Chapter 13-income test is one of main things that determines your eligibility for Chapter 13 bankruptcy. However, there are other eligibility criteria for Chapter 13 bankruptcy, most of which work differently. Should you file for Chapter 13, you will have to go through an income test (similar to the means test in Chapter 7) to determine how long your Chapter 13 repayment plan will last. When you file for Chapter 13 bankruptcy, there is no “means test” to determine whether your income is too high. In fact, opposite forces are at work in Chapter 13 — if your income is so low that you cannot fund a repayment plan, you will not be eligible for Chapter 13. Another eligibility test is the amount and type of debt you owe. Maryland individuals are eligible for Chapter 13 relief if their unsecured debts (credit cards, medical bills, etc.) are less than $419,275 and secured debts (home, car, property, etc.) are less than $1,257,850. If your debts exceed these amounts, you can file a Chapter 11 case to reorganize your finances, similar to a corporation.
Only certain trusts, and individuals or husbands and wives who file jointly are eligible for Chapter 13 bankruptcy. Businesses and other entities are not eligible for Chapter 13. They must file under Chapter 11 or Chapter 7. Therefore, Chapter 13 is only applicable to individuals and not businesses or organizations.

Those wishing to file for Chapter 13 must prove that they have filed state and federal income taxes for the previous years. Furthermore, you cannot file under Chapter 13, or any other chapter, if a previous bankruptcy petition was dismissed within the last 180 days because you failed to appear in court or comply with the court’s orders or if you failed to make plan payments and the Trustee moved to dismiss the petition.  However, if you voluntarily dismissed your case, you may be able to refile.  An experience bankruptcy lawyer can help you avoid your case being dismissed as noted above.

Individuals must receive credit counseling from an EOUST -approved credit-counseling agency, like Allen Credit and Debt Counseling Agency, at least 180 days before filing for Chapter 13. The EOUST is the executive office for United States Trustees.

Advantages of Chapter 13 Bankruptcy vs. Chapter 7

Most filers do not have a choice to decide between filing for a Chapter 7 or a Chapter 13 due to their financial circumstances.  However, sometimes, the circumstances a person are facing do cause a person to decide whether a Chapter 7 or Chapter 13 case is the best for their circumstances.  When it comes to Chapter 13 bankruptcy, we can all agree that it can be the ultimate solution, which has seen many people, including homeowners, benefit in many ways from saving a house from foreclosure to a full reorganization of finances. 

Hiring Chapter 13 Bankruptcy Lawyer

Bankruptcy law is a specific type of law and the law is so specific that the Federal Courts have  divisions to handle only bankruptcy cases.  It is important to hire an experience bankruptcy lawyer with knowledge of bankruptcy law.  Bankruptcy issues are complex in their ways, and there are lawyers with particular expertise in handling them. We can also agree that someone can solve these cases without the hassles of hiring a lawyer. However, the result often never reflects the most desirable outcome some could have wished to have. Maryland presents an endless list of law firms, which are the epitome hosts of attorneys and lawyers of all classes.

When you are looking to hire a bankruptcy attorney, notably for Chapter 13, The Philips Law Offices, LLC is the firm where you will get the right answers for your peace of mind in resolving your particular debt circumstances. What makes us the best here at the Phillips Law Offices is that we know the stress of dealing with debt and we know how to successfully eliminate that stress with financial recovery.  As one of the premier bankruptcy attorneys in Maryland, we can tell you with confidence that bankruptcy may very well be your best option. Moreover, we have the expertise to help you in the following ways.

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