WILL I LOSE EVERYTHING I OWN IF I FILE BANKRUPTCY?
If you file bankruptcy, it does not mean that you will lose everything. Under the bankruptcy code, once you file, a bankruptcy stay is issued and all of your possessions belong to the estate. Under Maryland law, you can exempt up to $12,000.00 worth of personal property, regardless of what it is and how it is titled. So, if you have $12,000.00 in the bank you can exempt that. If the fair market value of your total assets was less than $12,000.00, you can keep all of that. If you do have an excess of $12,000.00, the trustee may require you to liquidate some of the assets or turn over some of the cash that exceeds your exemption limit. If this is a substantial amount, you may need to consider filing a Chapter 13 bankruptcy, which is a debt reorganization bankruptcy. You should contact an experienced bankruptcy attorney to find out what your options are.
WHAT KINDS OF BANKRUPTCY CAN I FILE?
There are four types of bankruptcies you can file. First is a Chapter 7 bankruptcy, which is a straight up, wipe everything out bankruptcy. There are certain conditions and requirements you must meet before you file for bankruptcy. A Chapter 7 bankruptcy will give you a fresh start and it generally wipes out all of your secured and unsecured debts. However, some debts that are not dischargeable, such as alimony, child support, certain taxes, student loans, criminal restitutions, and intentional torts. A Chapter 11 bankruptcy is for businesses that make over $350,000.00. It is a reorganization plan, similar to a Chapter 13, except for businesses. There is a Chapter 12 bankruptcy that is exclusively for farmers. There is a Chapter 13 bankruptcy which is a debt reorganization plan that allows creditors to restructure their debt and to pay it off over a three to five year period of time. This is a highly technical bankruptcy and you need to hire a bankruptcy attorney to perform. This bankruptcy is popular among homeowners that have fallen behind on their mortgages and now are able to make the monthly payments but need help with the past due prearranges. It is also for debtors that do not qualify for Chapter 7 bankruptcy because their incomes are too high.
HOW DOES FILING BANKRUPTCY EFFECT MY CREDIT?
Actually, filing bankruptcy will be a positive thing. It does wipe the slate clean as far as all the debt you owe will be discharged. You become a better credit risk after filing bankruptcy because you can’t file again for another seven years and your creditors know this. If you were to default on a loan or credit card, the creditor knows that they are more likely to collect the debt through the collections process than if you hadn’t filed bankruptcy.
WHAT HAPPENS TO MY CREDIT SCORE WHEN I FILE BANKRUPTCY?
Generally, most people who file bankruptcy have low credit scores. This will not effect that. What is does is put a freeze on getting credit while you are in a bankruptcy, meaning that none of the credit companies will loan you money or give you credit cards. However, once you are out of the bankruptcy and receive your discharge, those credit card companies view you as a better credit risk and will extend credit to you.
DO I NEED AN ATTORNEY TO FILE BANKRUPTCY?
You should hire an experienced bankruptcy attorney to help you file. Bankruptcy is not generally something you can do on your own. In Maryland, they must be filed electronically and they are hard to do. You must understand bankruptcy law so that you can file your petition correctly and that it will go smoothly when you go in front of your 341 meeting with the Chapter 7 trustee. There are certain documents that must be given to the trustee prior to the hearing and if you hire an attorney they will be able to walk you through this process.
WHAT IS A CHAPTER 7 BANKRUPTCY?
Chapter 7 bankruptcy is a bankruptcy that allows you to get a fresh start by wiping out your secured and unsecured debt. By filing this, there are certain income requirements based on your family size. If you own a house but do not own a lot of equity in it, you can file a Chapter 7. This is popular among debtors who want a fresh start and need the ability to start clean. There are some limitations. You cannot discharge certain debts, such as alimony, child support, certain taxes, student loans, criminal restitutions, and intentional torts. There is a means test that has to be applied and you have to satisfy that requirement. Your debt can not be over a certain amount. It will always help to contact a Chapter 7 bankruptcy attorney.
WHO SHOULD FILE A CHAPTER 7 BANKRUPTCY?
A Chapter 7 bankruptcy is for those debtors that find themselves in over their heads with credit card debt or extraordinary medical expenses and need a fresh start. If you own very little and your income does not violate the means test, you should strongly consider filing a Chapter 7 bankruptcy if you are in financial straits. This is a fresh start that wipes out your secured or unsecured debt.
WHAT ARE THE QUALIFICATIONS FOR A CHAPTER 7 BANKRUPTCY?
First and foremost, you must have debt that you can no longer afford to pay. Generally, you must be in that “robbing Peter to pay Paul” situation and your income has to satisfy the means test. If it does not, you would have a hard time qualifying for a Chapter 7 bankruptcy. It would be a presumption of abuse if your income is over the thresholds that are provided and you would have a difficult time getting a Chapter 7 discharge. But, ideally, this is the typical consumer-debtor bankruptcy for people that do not own homes and are having a hard time making ends meet.
WHAT IS A CHAPTER 13 BANKRUPTCY?
A Chapter 13 bankruptcy is a debt reorganization bankruptcy that has a plan. Generally speaking, the plan will be from anywhere to three to five years. Those who file Chapter 13 bankruptcies are generally people who own homes and have fallen behind in their mortgage and have accrued significant arrears. The arrearage is put into a payment plan and is paid back over a three to five year period of time. There is also a formula to calculate how much of your unsecured debt will be paid back. As a general rule in Maryland, there is a 10% payback for every dollar owed of unsecured debt. This can go up to 100% payment plan depending how much equity you have in the property or income you have over the means test. In order to file a Chapter 13 bankruptcy, you really need to hire an experienced bankruptcy attorney.
WHO SHOULD FILE A CHAPTER 13?
A Chapter 13 bankruptcy is primarily for homeowners who have become delinquent in their mortgage payments and want to keep their homes. They usually have fallen behind on their mortgage for a variety of reasons and are now in a better place to stay current on their mortgage and catch up based on the arrangements through a payment plan. If you cannot qualify for a Chapter 7 bankruptcy then you should consider filing a Chapter 13. Regardless, you should discuss your options with an experienced bankruptcy attorney.
HOW IS CHAPTER 13 BANKRUPTCY DIFFERENT THAN CHAPTER 7 BANKRUPTCY?
A Chapter 7 bankruptcy is straight forward. You file and then you have a 341 meeting and you only have one hearing. At the end, you get a discharge and all of your debts are discharged. A Chapter 13 bankruptcy is basically for homeowners who have fallen behind in their mortgage and have accrued significant arrearage and need to make that up in a payment plan. It is also utilized by those whose income is significant enough that it would be considered abuse of the means test for them to file Chapter 7. They would need to file a Chapter 13 and restructure your debt.
HOW DO I STOP CREDITOR HARASSMENT?
If you file bankruptcy, an automatic stay is issued under the federal bankruptcy code. All creditors must stop whatever activity they are doing against you to collect the debt. If they are calling you and harassing you, that has to stop. If they have filed suit against you, that suit would have to stop. If you have a lawyer, your lawyer would have to file a suggestion of bankruptcy. If you have an experienced bankruptcy attorney, they will file the suggestion of bankruptcy and that will stop the lawsuit in its tracks and lessen your anxiety.
HOW DO I STOP WAGE GARNISHMENTS?
Obviously, filing a bankruptcy will stop wage garnishments. Once you have filed bankruptcy, you need to contact your payroll department and provide them with your bankruptcy case number and proof of filing. Additionally, you need to notify the creditor of the bankruptcy filing as well as notifying your bank. An experienced bankruptcy attorney can help you with that process.