Chapter 7 Bankruptcy

The laws that govern bankruptcy are federal laws, not state, so you must file in a federal court. Chapter 7 bankruptcy is a lot more common, as it is designed for those who do not have the income to cover their debts and must liquidate their assets in order to pay the debt.

Maryland
Chapter 7 Bankruptcy

As a mid-Atlantic state blessed with a wide range of landscapes and one of the original 13 colonies, Maryland earns itself the nickname “America in Miniature.” This small state has the beauty of waterways, pine groves, gentle hills, marshlands, and dunes. Hosting Maryland Science Center and the National Aquarium, Maryland also boasts delicious seafood and the Chesapeake Bay. Leasing, rental. Real estate, insurance, and finance are some of the largest industries in Maryland.

Like every state of the Union, there are cases of people filing bankruptcy even though there haven’t been any high rate of bankruptcies in Maryland. That is why it is vital to examine some specifics of filing for bankruptcy in Maryland.

Maryland Chapter 7 Bankruptcy: The Basics

Federal law provides for exemptions on certain property. This means that you can retain ownership of some of your assets, while the bankruptcy trustee (like the Phillips Law Offices) can sell the rest of the property to help cover the amount owed on the debt.

The federal government maintains a list of exemptions, but states may also provide their own list. As such, you have the chance to choose if you prefer the state or federal list of bankruptcy exemptions. However, you cannot pick or choose items from both.

Maryland differs from many states because it insists on using the state list of exemptions over the federal list. You can still use certain federal non-bankruptcy exemptions like those that affect veteran’s benefits. This is why it’s important to contact an experienced bankruptcy law firm like The Phillips Law Offices. We understand the intricacies of the law that you may not be
aware of!

Maryland Bankruptcy Exemptions: What Property Can You Keep?

We’ve put together a list of basic exemptions based on Maryland law as a guideline for filing for bankruptcy. But it is a good idea to consult with an experienced bankruptcy attorney prior to filing, because you may have special types of debt that may or may not be discharged. There is also the possibility to reorganize your debt and negotiate new terms with your lenders.

There is also dollar limit to most exemptions. You can only take an exemption up to the specific dollar amount of equity in the property.

Debt Discharge and Reaffirmation

In Chapter 7 Bankruptcy, debtors typically have few assets, unsecured bills, or large credit card debts. Bankruptcy can eliminate the vast majority of these types of debt. However, you may not be able to discharge specific debts in a Chapter 7 bankruptcy including student loans, certain taxes, fraudulent debts, child support, or alimony.

By reaffirming those debts, you may keep specific secured debts like your home, furniture, and cars. To achieve this, you need to sign a voluntary “Reaffirmation Agreement.” It will not be possible for you to wipe out (or bankrupt) that debt again for eight years if you want to reaffirm the debt. The debt will still exist along with the need to continue paying it as you were obligated to do so before you filed bankruptcy.

You’ll also need to bring payment current for you to reaffirm the debt. If you’re in default on a mortgage, you’ll have to keep your payments up to date in order to reaffirm the debt.

Affirming your debt means that you can state that you wish to keep your furniture or home, but will allow your jewelry or vehicle to be sold back to the respective creditors.

In the first 60 days after you file the agreement with the court, you can set aside the reaffirmation agreements. You can also do so with an Order of Discharge issuance by the court.

Bankruptcy Exemptions in Maryland

Here are Maryland’s top 5 exemptions;

Maryland Law	Types of exemption
$25,150	Homestead
$6,000	Cash or personal property of any kind that is not already covered
$5,000	Personal property (can include a vehicle)
Vary by county	Wages
Generally exempt	Pension/retirement
$1000	Household furnishings

The Maryland Bankruptcy Means Test

You’ll need to complete the means test in order to file for bankruptcy. This calculates your income and compares it to the Maryland median income to determine whether you can pay back part of your unsecured debts through a Chapter 13 bankruptcy.
If your income falls below the Maryland Median income for your home size, you may be exempt from the means test.

Exemptions for the Means Test

You may be exempt from the mean test if your debts are not primarily consumer debts.Disabled veterans that have incurred debt performing a homeland defense activity or primarily during active duty are also exempt from the means test.
Contact us at The Phillips Law Offices to see if your special case is exempt.

Median Income in Maryland

You may be eligible to file a Chapter 7 bankruptcy or have it presumed that you pass the means test if your current monthly household income is not more than the Maryland median income for a household of your size.

Averaging your monthly income over the last six calendar months determines your average household income. In Maryland, waiting for one or two months could bring your income under the median level if your income has declined over the last six monthsif you were over the median income limit.

You will need to multiply your average monthly income by 12 to determine your annual income to compare against the Maryland median income limits. These limits are (as of November 2020):

Calculating the Means Test

Some of the required information for the means test includes income, expense information, unemployment benefits, household expenses paid by other people, pension and retirement plans, interest and dividends, rental income, and business income.

The local, national, and Maryland averages determine much of the information related to your expenses. This information also comes from the Internal Revenue Service and the Census Bureau. You are allowed exemptions for some expenses, like welfare, health, and required
obligations that you need to pay legally.

You can only determine the amount of income under the bankruptcy law that you have available for the payment of their unsecured creditors in a Chapter 13 plan after subtracting your allowed Maryland expenses from their income and you’ve collected all the required information.

You may file Chapter 7 if you have passed the means test if your total monthly income is less than $7,474 over the next 60 months. You may not have the option of filing Chapter 7 if you fail the means test if your total monthly income is more than $12,475. You can determine whether you have the option to file a Chapter 7 case and must do further calculations if your disposable income under the means test is between $7,475 and $12,475.

Do I Need to List All of My Debts If I File for Bankruptcy?

Yes. When you are filing personal bankruptcy, you need to include all of your debt, such as fines and tickets, taxes, student loans, medical bills, credit cards, and any debts or loans to family members. We advise our clients to bring all of their financial information, even if they believe it may be exempt.

It would be best if you also listed specific contingent debts like personal guaranties not yet come due. Since the bankruptcy laws want you to list every debt, you cannot choose which debts you want to list. You also don’t have the chance to leave off any credit accounts to maintain an active credit card after bankruptcy when filing a bankruptcy.

Even if you don’t report your credit cards on the bankruptcy schedules, they will most likely be deactivated after the filing date. There’s a chance to file an amendment to add the creditors in your petition if you inadvertently leave creditors off your filing.

Should You Hire an Attorney?

Hiring a bankruptcy attorney can be a difficult decision. It does not come without expenses upfront, but in the long run, our clients are set up for a stronger financial future than if they filed themselves. Bankruptcy law is complex but is ultimately designed to help you.

Experienced bankruptcy attorneys like The Phillips Law Offices can help you discover whether you can re-negotiate your debt, have some debt forgiven, or whether it’s best to file a Chapter 13 bankruptcy.

We strive to build a personal relationship with our clients and help you feel at home throughout the entire process. We have more than 20+ years of experience helping people struggling with excess debt or a change in financial circumstances. Contact us today for a free consultation about your debt situation.