Bankruptcy gives hope to individuals who are struggling with debt and financial obligations. It gives you a chance to achieve a debt-free life and have a fresh start. Filing bankruptcy will allow you to reorganize your finances, pay off a creditor, and pursue debt settlement.
Bankruptcy laws differ from state to state; therefore, it is essential to know and understand the state law to avoid any errors in filing bankruptcy. In Maryland, the process of bankruptcy filing is mainly governed by federal law. However, Maryland state law also plays a significant role in determining the assets that you can save and keep once you have filed for bankruptcy. A reliable Towson bankruptcy lawyer can help you understand these laws depending on the jurisdiction.
This article will explain how bankruptcy works in Maryland. Here are some of the questions that you might have in mind when you file for bankruptcy:
- How Do I Choose the Right Bankruptcy Chapter?
- How Do I Qualify for a Specific Bankruptcy Chapter?
- Can Bankruptcy Wipe Out My Debts?
- How Can I Protect My Property in Bankruptcy?
- What are the Bankruptcy Exemptions in Maryland?
- How to File Bankruptcy in Maryland?
- Where Do I File My Bankruptcy Paperwork?
- What is the Role of a Bankruptcy Lawyer?
How to Choose the Right Bankruptcy Chapter?
There are two common types of bankruptcy chapters: Chapter 7 and Chapter 13. Before you file for bankruptcy, it is important to know how to choose the best bankruptcy chapter that will solve your debt problems.
Chapter 7 bankruptcy is considered the fastest and most common type of bankruptcy. It allows liquidation of assets to pay creditors. Before filing Chapter 7 bankruptcy, you need to know the rules on how you can protect your assets and properties from liquidation. Bankruptcy does not automatically mean that you will lose all the assets that you have acquired. You can protect certain assets from being liquidated, while some assets classified under the non-exempt property cannot be protected. Under this chapter, your appointed bankruptcy trustee will be responsible for selling your non-exempt properties. The proceeds will be allocated to your creditors based on the payment plan.
In Chapter 13, you must pay back some or the full amount of what you owe to creditors under a repayment plan. The most important factor to consider in filing Chapter 13 is sufficient and regular monthly income to wipe out your debts. This chapter allows you to restructure and reorganize your debts through a repayment plan that will last for 3 to 5 years. This will be the option for you if you have non-exempt assets and properties that you want to keep.
How Do I Qualify for the Bankruptcy Chapter?
Before choosing the bankruptcy chapter to be filed, you must undergo the “bankruptcy means test”. This test is done to determine the best bankruptcy chapter that will solve your financial problems. If your family’s income falls below the median income of Maryland, it means that you pass the means test. On the other hand, if your family’s income exceeds the median income, you may still be qualified to pass the means test after you deduct a list of the allowable living expenses.
However, it is important to keep in mind that Chapter 13 bankruptcy can be an expensive option. To qualify, you need to pay your non-dischargeable debts and the value of your non-exempt property using all your disposable income.
Can Bankruptcy Wipe Out My Debts?
Bankruptcy can help you pay off various types of debt including credit card bills, medical bills, utility payments, personal loans, or car loans. However, not all your debts can be discharged in bankruptcy. Debts such as recent tax debt, student loans, or domestic support arrearages are considered non-dischargeable debts.
If you want to get rid of an existing auto loan, mortgage, or any secured debt, you have the option to give up the property that you’ve used as collateral. If you fail to pay back your debt, the creditor has the right to seize the collateral.
Declaring bankruptcy can stop wage garnishment, debt lawsuits, and debt collection calls. With the help of a qualified Towson bankruptcy attorney, you will see an improvement in your finances within the first six months from the bankruptcy filing date.
How Can I Protect My Property in Bankruptcy?
Bankruptcy doesn’t mean that you will lose everything that you have. In Maryland, there are bankruptcy exemption laws that can protect your assets and properties. Here are the significant bankruptcy exemptions that can be useful to your bankruptcy case:
Exempt and Non-Exempt Property
Bankruptcy law allows debtors to keep a certain amount of property after going through bankruptcy proceedings. This is called the “exempt” property. This generally includes your assets that are necessary for living and working. On the other hand, a property that cannot be exempted is called a “non-exempt” property. It generally covers items that fall outside of the necessities for living and working.
Doubling bankruptcy exemptions
Spouses who decide to jointly file for bankruptcy can be eligible for a double exemption as long as the property is owned by both.
What are the Bankruptcy Exemptions in Maryland?
Here are some of the common Maryland bankruptcy exemptions:
- Homestead exemption (this type of exemption allows you to protect your owner-occupied residential property for the maximum coverage worth $25,150)
- Damages, life insurance, health, or disability benefits
- Personal injury, wrongful death damages, and lost wages awards
- Personal property exemption (up to $5,000 exemption in tools used in your trade; up to $1,000 in furnishings, appliances, cloth; up to $5,000 exemption for personal property)
- Public earnings, support, and benefits
- Retirement benefits
- Tax-exempt retirement accounts
- Wildcard exemptions (property or cash up to $6,000, plus an additional $5,000 of value in personal property)
Towson bankruptcy lawyers usually advise their clients to be reminded that the amount of exemption may be subject to change. It is important to check the updates for adjustments of exemption from time to time.
How to File Bankruptcy in Maryland?
You may start your bankruptcy filing by accomplishing the official bankruptcy forms from the United States Bankruptcy Court website. You need to fill out the form with the complete details of your current financial situation. You need to declare all your assets, liabilities, living expenses, monthly income, bank account information, credit card debt, loan debt, and property transactions. A credible Towson bankruptcy attorney can assist you in such filing. You need to ensure that all information and figures in your paperwork are accurate before you submit it to the local court.
It is mandatory to take up two financial courses from accredited credit counseling agencies as part of the bankruptcy process. You need to take credit counseling sessions before bankruptcy filing and a debt management course after the bankruptcy filing.
Where Do I File My Bankruptcy Paperwork?
Once you complete all the requirements, you may file the bankruptcy case in the local bankruptcy court in Maryland and pay the processing fee. Two bankruptcy courts in Maryland accept bankruptcy filing. For instructions and local rules, you may refer to the website of the Maryland bankruptcy court.
What is the Role of a Bankruptcy Lawyer?
Bankruptcy is a progressive process that will help you solve your financial problems one step at a time. You need to have patience and exert extra effort for you to succeed. It has to be done systematically and accurately. For legal help in your bankruptcy filing, do not hesitate to schedule a consultation with our experienced Towson bankruptcy lawyers at The Grafton Firm, LLC. Our competent bankruptcy lawyers will help you choose the best bankruptcy chapter, determine the perfect time to file, and save the assets or properties that you want to keep.