In-Depth Guide To Filing For Bankruptcy In Maryland
Bankruptcy is a legal process offered to persons that cannot repay their debts. It is a way for a person, under the protection of the law, to get a fresh start financially without the burden of preexisting debt. Bankruptcy can stop house foreclosures, car repossession, and wage garnishment. Bankruptcy status also protects a person from collection agency phone calls and letters. This guide discusses the details about filing for bankruptcy in Maryland.
The topics covered are:
- Do I Need A Lawyer To File For Bankruptcy?
- Where Do I File For Bankruptcy In Maryland?
- Will I Need To Get Debt Counseling?
- What Is The Means Test And Why Is It Important?
- What Are The Difference Between Chapter 7 And Chapter 13?
- What Can I Keep When I File For Bankruptcy?
- How Much Does It Cost To File For Bankruptcy?
- What Is A Bankruptcy Trustee?
- Will I Have To Appear In Bankruptcy Court?
- What Information Do I Need To Provide For Bankruptcy Filing?
- What Forms Do I Have To Fill Out For Bankruptcy Filing?
- Do I Have To Attend Any Meetings?
- What Is Discharge And Why Is It Important?
- How Does Bankruptcy Protect Me?
- What Happens After I File For Bankruptcy?
- Will My Credit Be Affected By Filing For Bankruptcy?
- Will Bankruptcy Take Care Of All My Debts?
Do I Need A Lawyer To File For Bankruptcy?
There is no legal requirement to have a lawyer when filing for bankruptcy, however, in most cases it is recommended. The law can be very complex, especially with the federal bankruptcy law changes implemented in 2005. An attorney serves two important purposes in the bankruptcy process:
- Ensures that persons filing for bankruptcy meet all the requirements (forms, meetings, disclosures, etc.)
- Guarantees the rights of the person filing for bankruptcy under the full protection of the law
Where Do I File For Bankruptcy In Maryland
Bankruptcy courts are located in over 90 federal judicial districts across the country. Each state has one or more courts. The US Bankruptcy Court District of Maryland has two court locations, in Baltimore and Greenbelt. There is also a Salisbury location which is for hearings only. Almost all bankruptcy proceedings occur outside of the courthouse and are directed by a court supervised trustee.
The counties served by the Baltimore Division are:
- Anne Arundel
- Baltimore City
- Baltimore County
- Queen Annes
The counties served by the Greenbelt division are:
- Prince Georges
- St. Mary’s
Will I Need To Get Debt Counseling?
The Federal Trade Commission requires credit counseling within 180 days before you file for bankruptcy. If this counseling is not completed, the petition for bankruptcy is likely to be dismissed. In some cases, a 180 day wait will be implemented before you can file again.
What Is The Means Test And Why Is It Important?
The Maryland means test determines if you qualify for Chapter 7 bankruptcy or if you must file for the more rigorous Chapter 13. If your income is below the median income for Maryland state residents, then you are exempt from the test and can file for Chapter 7. Your median income is calculated by averaging your monthly income over the prior six calendar months. You are also exempt from the means test if:
- Your debts are not primarily consumer debts
- You are a disabled veteran with debts incurred during active duty
If your median income is over the Maryland state median, then you must complete the means test by calculating your household income and expenses. Income includes essentially all sources of income. Expenses are based on national, state, and local averages taken from census and IRS standards. Some other expenses allowable in the means test calculation might be child support, healthcare, and education costs. If your income exceeds your expenses by a specified amount, then you cannot file for Chapter 7 bankruptcy.
What Are The Difference Between Chapter 7 And Chapter 13?
Chapter 7 bankruptcy (unlike Chapter 13) means that all debt is settled with the sale of your non-exempt assets. The money generated from the sale of non-exempt property or assets goes towards paying creditors. Exemptions for the state of Maryland might include:
- Personal home
- Insurance policies
- Personal property (appliances, furniture, clothing, etc.)
- Trade tools
- Wages (amounts may depend on county of residence)
The money generated from the sale of your non-exempt property or assets goes towards paying your creditors. In this way, foreclosures and credit card collection agency calls are terminated. Some debts, however, cannot be discharged under Chapter 7, such as:
- Alimony & child support
- Fraudulent debts
- Some taxes
- Student loans
Once the Chapter 7 process is finished all debts are settled and the person filing for bankruptcy can make a fresh financial start. Remember though, mortgage and car payments still must be paid if you want to keep your home or car. Chapter 13 involves a stricter process where the debtor agrees to make monthly payments towards paying down all, or part, of their debt. All financial activity is monitored closely during the repayment period, and any spending on luxury items and vacations must be reduced or eliminated. Chapter 13 can prevent home foreclosure and provide for missed mortgage, car or tax payments. At the end of the payment term, all remaining debt is released.
What Can I Keep When I File For Bankruptcy?
As explained in the section above, there are certain exemptions allowable in bankruptcy filing. General guidelines specify that individuals may exempt up to $12,000 of property, and married couples filing jointly up to $24,000.
What Is A Bankruptcy Trustee
A bankruptcy trustee is a private individual or corporation, appointed by the court, and is responsible for reviewing the bankruptcy petition and schedules. The trustee can also take action to recover any property involved in the bankruptcy estate. A bankruptcy trustee is responsible for the liquidation of assets and the distribution of payment to creditors. In Chapter 13, the trustee also monitors the debtor’s payment plan and makes payments to creditors.
Will I Have To Appear In Bankruptcy Court?
As an officer of a United States district court, the District of Maryland’s bankruptcy judge has judicial power over all bankruptcy cases. However, most bankruptcy proceedings are administrative and occur outside of the courthouse. A trustee handles almost all of the proceedings. In all but a few cases, a court appearance is unlikely unless there is an objection raised in the case.
What Information Do I Need To Provide For Bankruptcy Filing?
When you file for bankruptcy, you will be asked to provide all relevant financial information. This could include:
- All sources of current income
- Prior two years of major financial transactions
- Monthly living expenses
- Secured and unsecured debts
- All holdings in stocks, bonds, or other financial assets
- Property/real estate deeds
- Prior two years state and federal income tax returns
- Car titles
- Loan documents
What Forms Do I Have To Fill Out For Bankruptcy Filing?
The forms required for bankruptcy filing vary from case to case. First of all, there is a form that calculates the means test. There are also forms specific to Chapter 7 or Chapter 13 filing. Finally, there are additional forms, called schedules, that record data about creditors, debt, income, assets, expenses, and overall financial affairs. The US Bankruptcy Court District of Maryland provides an online library of forms.
Do I Have To Attend Any Bankruptcy Meetings?
After the bankruptcy forms have been filed, a trustee will review your case and assume legal control over all non-exempt property and assets. These will be sold and the proceeds will go towards paying the creditors. In most cases you will be asked to attend a “341 meeting” with the trustee and possibly with some of the creditors. This meeting usually occurs about a month after filing. This meeting gives creditors a chance to make any objections or ask questions. The meeting is usually brief lasting 5-15 minutes.. It is uncommon for creditors to attend Chapter 7 meetings, and one or two creditors might attend Chapter 13 meetings. In these meetings, it pays to have a reliable lawyer in the event that there are any objections and to make sure nothing is overlooked.
How Does Bankruptcy Protect Me?
Bankruptcy provides you with certain legal protections. For example, once your petition has been filed, a letter is sent to all creditors for an “automatic stay.” This means they are not permitted to communicate with you in any way, or demand payment, outside of the bankruptcy proceedings. Bankruptcy can also stop foreclosure on your home or avoid the repossession of a vehicle or property. You can also make a claim to have property returned to you against creditors that may have repossessed assets from you fraudulently. Bankruptcy can also prevent or restore terminated utility service.
What Happens After I File For Bankruptcy?
In the case of Chapter 7, your debts are discharged when the process is finished. In Chapter 13, you will have to make payments and report to the bankruptcy trustee until the payment term ends. For all cases, before your debts are fully discharged, you will also be required to attend a debtor education course. This course teaches you how to develop a personal budget, manage money, and use credit appropriately.
What Is Discharge And Why Is It Important?
A bankruptcy discharge releases the debtor completely from any liability for the debts outlined in the bankruptcy petition. Creditors can no longer take any action in any way against the debtor after discharge. Once the bankruptcy has been filed and no objections are raised, the discharge occurs automatically. Trustees and creditors have 60 days to challenge the decision to discharge. If no objections arise, you are notified within three to six months by mail of the discharge of your debts. For Chapter 13, you will need to attend a hearing to confirm that all payments have been made in agreement with the bankruptcy filing.
Will My Credit Be Affected By Filing For Bankruptcy?
Bankruptcy information can appear on your credit report for up to ten years, but the effects on credit are generally much shorter lived. In fact filing for bankruptcy often improves one’s credit. The US Bankruptcy Court District of Maryland has no role in providing this information. However, the credit rating organizations receive information reported to them by creditors. After filing for bankruptcy, it is a good idea to contact the three main credit agencies and send them a copy of your petition and schedules. This makes sure the information they have is accurate. The three agencies are responsible for generating credit reports:
You can also get a free credit report from annualcreditreport.com. Beware not to provide or ask for credit information from other agencies if you are not sure about their credibility.
Will Bankruptcy Take Care Of All My Debts?
All allowable debts in the bankruptcy filing are wiped clean 100%. However, there are some debts that do not apply to bankruptcy. For example, future payments on home mortgages are the responsibility of the person who took out the loan. However, if the property ends up being sold, bankruptcy can free you from having to pay additional money. Also, child support, alimony, legal fines, some taxes, and student loans generally are not discharged through bankruptcy.
Filing for bankruptcy in Maryland involves a process that protects your legal rights, and settles debts with creditors. The process can be complex, and good legal counsel helps ensure that nothing is overlooked. Contact Sirody & Associates or a FREE Consultation and advice from attorneys that specialize in bankruptcy law. Let our attorneys work to get you back on your feet.