Recently, a lot of people have lost their jobs through no fault of their own. To get through these uncertain times, many are wondering about their options under bankruptcy.
This is a short guide to declaring an Ocean City or Baltimore bankruptcy.
Bankruptcy allows consumers and businesses to eliminate or repay some or all of their debts under the protection of the federal bankruptcy court. Many people feel ashamed when they can’t pay their bills and have to resort to bankruptcy. However, it’s important to remember that bankruptcy is legal and that creditors, especially the large ones, factor in defaults and bankruptcies as the cost of doing business.
If you are starting to receive calls from creditors or collection agents, a bankruptcy filing can relieve the stress because an automatic stay goes into effect when bankruptcy documents are filed in court which means that creditors are not allowed to contact you and can only talk to your attorney.
For the most part, bankruptcies can be divided into two types — liquidation and reorganization. A Chapter 7 bankruptcy allows you to liquidate or to cancel out most of your unsecured debts while a Chapter 13 bankruptcy allows you to discharge your debts by paying all or a portion of them over a three or five-year period. Unsecured debts are those debts such as credit and department store credit cards that are not backed by a piece. Secured loans, on the other hand, are backed by property. Mortgages and car loans are secured loans.
Not everyone can file for Chapter 7 bankruptcy. For example, if your disposable income is enough to fund a Chapter 13 repayment plan — after subtracting certain allowed expenses and monthly payments for certain debts — you won’t be allowed to use Chapter 7 bankruptcy. Of course, if you’ve recently lost your job and don’t have any money coming in, then you can file a Chapter 7 bankruptcy.
Chapter 13 bankruptcy is also known as “wage earner” bankruptcy because, in order to file for Chapter 13, you must have a reliable source of income that you can use to repay some portion of your debt. When you file for Chapter 13 bankruptcy, you must propose a repayment plan that details how you are going to pay back your debts over the next three to five years. The minimum amount you’ll have to repay depends on how much you earn, how much you owe, and how much your unsecured creditors would have received if you’d filed for Chapter 7 bankruptcy. If you have secured debts such as a house or a car, Chapter 13 gives you an option to make up missed payments to avoid repossession or foreclosure. You can include these past due amounts in your repayment plan and make them up over time.
There is a means test that varies from state to state. When you file for bankruptcy in Maryland, you must compare your income to the median income for a household of your size in Maryland. If your income is less than the median, you will be eligible to file for Chapter 7 and, if you choose to file for Chapter 13, you can use a three-year repayment plan. This is the means test. If your income is above Maryland’s median income, you still might qualify for Chapter 7, but you’ll have to provide detailed information about your expenses and payments on secured debts in order to find out. An experienced bankruptcy attorney can help you to determine which type of bankruptcy best fits your needs.
You must also get credit counseling within the six months before you file for bankruptcy. You’ll also have to take a debtor education course before you get a bankruptcy discharge. A discharge is the form you get from the court at the end of the process that says your debts have been eliminated.
Though bankruptcy can eliminate many kinds of debts, such as credit card debt, medical bills and unsecured loans, there are many types of debts, including child support and most tax debts, that cannot be wiped out in bankruptcy.
In a separate blog, we’ll provide answers to some of the most commonly asked bankruptcy questions.
A Baltimore bankruptcy attorney can help you to determine the best way to get rid of debt and out from under creditor calls if you are considering bankruptcy. An experienced Ocean City bankruptcy attorney can devise a strategy for you that allows you to use the bankruptcy laws to your advantage. The consultation is free. The attorneys at The Law Offices of Thomas J. Maronick can help. You can contact Thomas Maronick on his cellphone at 410-881-4022, the law office at 410-881-4022 or through the website for a free consultation.