Considering Bankruptcy?

Considering Bankruptcy?

Considering Bankruptcy?

If you’re at the point where you are considering bankruptcy to get out from under debt and phone calls from collection agencies, there is relief. Federal law allows people and corporations to take advantage of a process – bankruptcy -- to eliminate debt.

When Is the Best Time to File For Bankruptcy?

The leading reasons for individuals to file bankruptcy are:

You shouldn’t feel bad because you are taking advantage of the law to shed yourself of debt. First of all, bankruptcy – the discharge of debts – goes back to the Old Testament. And, you’re in good company if you decide to declare bankruptcy. Many of the nation’s largest corporations have taken advantage of the bankruptcy laws to get out of debt. Some companies have even filed for bankruptcy more than one time.

The two types of bankruptcy most important to individuals are called “Chapter 7” and “Chapter 13.” The names come from the chapter of the federal law that lays out the requirements for each type of bankruptcy.

Chapter 7 Bankruptcy

Chapter 7 is a liquidation bankruptcy. It’s designed to designed to wipe out your general unsecured debts such as credit cards and medical bills.

Basically, a trustee gathers up your goods that have value and sells them to satisfy your creditors. If, after the sale of the goods, the money obtained isn’t enough to pay the amounts owed, the creditors must be satisfied with what they got and can’t go after you for more money. It’s not unusual for unsecured creditors to receive nothing in a Chapter 7 bankruptcy proceeding.

Chapter 7 bankruptcy is typically for low-income debtors with little or no assets who want to get rid of their unsecured debts. If you make too much money, you may be required to file a Chapter 13 bankruptcy.

Chapter 13 Bankruptcy

The other type of bankruptcy is a Chapter 13. Chapter 13 is a reorganization bankruptcy designed for debtors with regular income who can pay back at least a portion of their debts through a repayment plan.

Many debtors choose to file for Chapter 13 bankruptcy because they are facing foreclosure because they are behind on their mortgage payments and want to keep their house, are facing unpaid taxes or are behind on their child support.

In Chapter 13, the foreclosure, repossession, garnishment, seizure or legal action is placed on hold and a court-approved payment plan is put into place. A Chapter 13 allows homeowners to pay each month a portion of the mortgage amount in arrears while continuing to make their regular mortgage payments.

The individuals’ other debts are also made to be part of the reorganization plan.

As a result, this process can save the clients' home and provide relief from creditor calls.

Chapter 13 bankruptcy is for debtors who can afford to make monthly payments to get caught up on missed financial obligations.

A Baltimore bankruptcy attorney can help you to determine whether a Chapter 7 or Chapter 13 bankruptcy is the right choice for you.

What Do I Get to Keep?

In a bankruptcy, exemptions refer to the items you get to keep. Exempt property is shielded from the bankruptcy process.

In many instances, car payments and payments on credit cards that you want to keep can also be excluded from the bankruptcy. It’s called affirming a debt.

Exemptions and affirming debts in bankruptcy will be discussed in more detail in a future blog.

A Maryland bankruptcy attorney can explain your options if you are considering bankruptcy. The attorneys at The Law Offices of Thomas J. Maronick can help you if you are facing foreclosure, garnishment, unpaid income taxes, unpaid child support or struggling to pay medical bills and other debts. You can contact Thomas Maronick at 410.244.5068 or via our website for a free consultation.