Bankruptcy is the process, governed by federal law, under which debtors (individuals or business entities) seek protection from the collection efforts of their creditors. Upon the filing of a bankruptcy petition, the automatic stay goes into effect, preventing creditors from taking any further action to collect the debt. As a result, the filing of a bankruptcy petition can stop lawsuits, garnishments, and even foreclosures. In Maryland, an entity seeking bankruptcy protection files its petition for relief with the United States Bankruptcy Court for the District of Maryland. While there are several different types of bankruptcy cases, most individuals seek relief under either Chapter 7 or Chapter 13.
Yes, You Can Still File Bankruptcy!
Although the federal government did pass legislation in 2005 making it more difficult to file, maintain and successfully complete a bankruptcy case, most people are still eligible to obtain bankruptcy protection, and many people can still obtain the same type of relief as they could prior to October 17, 2005 (the date the new laws became effective). The introduction of means testing, the requirement of debtors to obtain different types of counseling, and the requirement of debtors to file tax returns are among the most significant of the major changes to the law that will affect you.
This is the initial process used by the courts to determine the eligibility of persons to file for Chapter 7 bankruptcy protection. In order to be eligible to file under Chapter 7 a person’s household income must be below Maryland’s median income for that person’s household size. As the state median income figures are computed by the federal government and change annually, the correct figure must be confirmed prior to the filing of a bankruptcy petition. As an example, at the time when this was written, a single parent with two small children must have an annual income of less than $85,151.00 in order to file a Chapter 7 bankruptcy case. If your income is above the median income, it is likely that you will need to file a Chapter 13 bankruptcy.
Before a person may file bankruptcy he or she will need to obtain (or at least attempt to obtain) credit counseling from an approved nonprofit credit counselor. Additionally, once in bankruptcy, before you can obtain a discharge (the reason you are probably filing for bankruptcy) you will need to complete a financial management course from an approved counselor. Maryland bankruptcy lawyers at LeViness, Tolzman & Hamilton can assist you in obtaining the required counseling.
Chapter 7 Liquidation
A Chapter 7 bankruptcy is often referred to as a liquidation. Chapter 7 bankruptcies are the most commonly filed bankruptcy cases. Under Chapter 7, the debtor is allowed to maintain a certain amount of property (approximately $12,000 worth). The debtor must surrender all other (non-exempt) property, if any, to the trustee who then sells the property and divides the proceeds of the sale among the debtors and creditors. In many cases debtors are not required to surrender any property.
At the completion of the bankruptcy case, the debtor receives a discharge, relieving the debtor of any further legal responsibility for those debts included in the bankruptcy proceeding. However, the discharge does not eliminate the debt. Therefore, if someone else is responsible for the debt beside the debtor, the bankruptcy will have no effect upon their obligation to pay the debt.
Chapter 13 Repayment
A Chapter 13 bankruptcy differs from a Chapter 7 bankruptcy in that under Chapter 13 the debtor enters into a repayment plan that provides for the full or partial repayment of certain debts. Only debtors with regular income may receive protection under Chapter 13. In Chapter 13 proceedings, the debtor must submit to the bankruptcy court a repayment plan providing for the repayment of a certain amount of the debtor’s debts. The debtor must obtain court approval for his or her Chapter 13 plan. Under the Chapter 13 plan, the debtor shall make monthly payments to the Chapter 13 trustee, who will then redistribute the plan payments among the participating creditors according to the terms of the approved plan. Chapter 13 plans usually last between 36 months and 60 months. Upon successful completion of the Chapter 13 plan, the debtor receives a discharge, relieving the debtor of any further legal responsibility for those debts included in the bankruptcy proceeding.
There are several reasons why individuals file under Chapter 13. Many debtors file Chapter 13 bankruptcy cases because they wish to prevent the loss of their car or home. Others are forced to file Chapter 13 simply because their average monthly income is too high or the value of their property is too great.
At LeViness, Tolzman & Hamilton, P.A. we will assist you in determining if you should file bankruptcy, and, if so, under what chapter you should file. We will draft your bankruptcy petition, represent you during your meeting of creditors and appear with you during hearings before the bankruptcy courts.
About Our Firm
LeViness, Tolzman & Hamilton, P.A.can give you the decisive edge when handling your bankruptcy case. Our experience, know-how, and resources will assist you with the process. Our Maryland bankruptcy lawyers and staff are committed to providing personalized and prompt service, and our record of success assures you that we have the experience and expertise necessary to get you the results you want and deserve. Call us today at 800-547-4LAW (4529) or contact us online for your free consultation.
Frequently Asked Questions
In most cases, the answer is no. Generally, a person files bankruptcy in order to save their house from foreclosure or car from repossession. While the mortgage or car loan will be included in the bankruptcy, most individuals elect to reaffirm these particular debts; that is, to keep the debts and retain possession of the assets.
At least once. All bankruptcy cases involve a Section 341 Meeting of Creditors, which is conducted by the trustee (the court-appointed attorney for the creditors). This is essentially a question and answer session, and you will be placed under oath. In most Chapter 7 cases, there is no court appearance before a judge. In Chapter 13 cases, there is a confirmation hearing, which is conducted before a judge, unless the terms of the Chapter 13 plan can be agreed upon in advance. Various other motion hearings do regularly occur; however, while the debtor must appear for the hearing, he or she is not usually required to testify.
Once you have retained LeViness, Tolzman & Hamilton, simply inform the creditors who are calling you that you have retained us and provide them with our telephone number. When this occurs, most creditors will stop calling you (usually after they contact us to verify that we do actually represent you). Legally, however, the creditors do not have to stop contacting you until they have been notified that a bankruptcy case has actually been filed. Thus, some creditors may continue to call you even after you tell them that you have hired an attorney. All such calls should stop within a week or two after the bankruptcy case is filed.
Generally, yes! Yes, it is very probable that you will be able to get credit after filing bankruptcy. Yes, I said yes. The bankruptcy will be noted upon your credit report, probably for the next ten years. However, bankruptcy has the effect of eliminating debt and thus reducing your debt level. As a result, creditors are often willing to lend you money. The general rule is that the larger the loan being sought, the longer it will take you after filing bankruptcy to obtain the loan. For example, many individuals can get a credit card issued to them mere months after filing bankruptcy. Also, some clients obtain car loans the day after they have received their bankruptcy discharge. But note well, most individuals will usually have to wait a few years before their credit reputation is sufficiently healed to qualify for a home loan or mortgage.
That depends upon the type of case you need to file. A Chapter 7 for a single person costs less than a Chapter 7 case for a couple. A Chapter 13 case is more complicated than a Chapter 7 case and thus more expensive. However, payment plans are offered by my office and, in fact, are often a component of Chapter 13 cases. Our office does have a set schedule it charges for these cases, and an explanation of what our fee will be and what type of bankruptcy case we believe is best for you will occur during your free initial consultation. No one is required to hire us during the initial consultation; we will advise you which type of bankruptcy we recommend, what it will generally cost you to file, and we will send you a retainer agreement in the mail so that you can consider at home if this is right for you.
Not likely. While the average person can find out who filed bankruptcy, they would have to contact the correct court and specifically request information about that person. While employers will often learn of a Chapter 13 filing, only the person’s creditors are initially told of the case. Usually your friends, family and neighbors will only learn of the filing if you tell them.
The discharge is the declaration by the federal government that you do not owe the debts that you owed on the date you filed your bankruptcy case (remember, a few types of debts are not dischargeable).
Most student loans, recent state and federal taxes, alimony and child support, fines, criminal restitution orders and some personal injury judgments.
NO! Almost all persons who file bankruptcy retain their property. The law allows for persons to keep up to a certain value or amount of property free and clear of the bankruptcy filing. If you have a lot of valuable property, you may need to file a Chapter 13 case in order to keep all of your property, but for the average person or family this is often not an issue.
Yes. Unfortunately, bad things can happen to good people more than one time in their lives. There are certain requirements but you will be able to file again once eight years have passed since the previous case was filed, and depending upon your situation, you may be able to get relief even though much less time has elapsed since your last filing.
No. You may have too little debt for it to make financial sense to file, but this depends upon your particular financial situation. It may make sense for someone with a few thousand dollars worth of debt to file and it may not make sense for someone with tens of thousands of dollars worth of debt to file. It simply depends upon your situation. If you are having difficulties meeting your obligations, please contact my office to schedule a no-cost consultation to see if bankruptcy makes sense for you.
It is actually possible to have too much debt for Chapter 13, but that amount is over $300,000 worth of unsecured debt (does not include your mortgage or car loan(s)), and very few people have that level of debt.
Yes. The debt does not go away; you just do not have to pay it. But nothing prevents you from paying a discharged debt. The discharge simply prevents someone from collecting the debt from you.