When considering bankruptcy, a consumer has two choices – a Chapter 7 liquidation or a Chapter 13 reorganization. This blog discusses the Chapter 7 bankruptcy process.
A Chapter 7 bankruptcy is a liquidation of debts which means that the debtor is allowed to liquidate or cancel out most of their unsecured debts. In general, the assets of the debtor that are judged to have value are “seized” and sold off to pay off the debts. However, in real life, there rarely is a “seizure” of the debtor’s assets because most debtors don’t have anything of value.
Debtors can eliminate unsecured debts such as credit card debt, medical bills, car loans, personal loans and payday loans, judgements from credit card companies and debt collection agencies and utility bills in a Chapter 7 bankruptcy filing.
However, many debts can’t be eliminated in a Chapter 7 bankruptcy. Child support and alimony, recent tax debts and other debts you owe the government such as fines and student loans can’t be eliminated in a Chapter 7 bankruptcy.
Chapter 7 is often filed by people who don’t have many or any high value assets such as a house. Homeowners, especially those with substantial equity in their house, often prefer to file a Chapter 13 bankruptcy.
You should be thorough in filling out the paperwork for your Baltimore Chapter 7 bankruptcy and include all your debts because, if a debt is not listed, you will have to continue to pay on it unless your paperwork is quickly amended to include the debt.
Of course, you should be equally thorough in listing all of your assets. If the trustee discovers that property has not been listed in your bankruptcy paperwork and has significant value, then your bankruptcy will be dismissed and you could be charged with fraud.
You can keep some property of value in a Chapter 7 bankruptcy. Debtors are allowed to keep some property by declaring that they are exempting the property, which means they are legally allowed to hold on to the items. Tools needed for your work and medical equipment are examples of property that can be retained by the debtor.
Debtors can also choose to keep some debts such as credit cards or a car payment by deciding to affirm the debt, which means that you fill out a form as part of your bankruptcy paperwork where you tell the court that will continue to make the payments. A Baltimore bankruptcy attorney can provide more details.
After deciding which type of bankruptcy is best suited to your circumstances, your income must pass a means test. Your current monthly income is measured against the median income for a family of your size in your state. If your income is less or equal to the median, then you are probably eligible to declare Chapter 7 bankruptcy. If you make too much money, then you will probably have to declare a Chapter 13 bankruptcy.
Once your paperwork is filed in court, creditors are not allowed to call you or contact you through the mail and must deal with your Baltimore or Ocean City bankruptcy attorney, so filing bankruptcy can relieve the stress of having to deal with creditors.
The Law Office of Thomas J. Maronick is open during the pandemic and will continue to meet your Annapolis, Baltimore, Essex, Ocean City, Towson, White Marsh bankruptcy needs. A Baltimore bankruptcy attorney can help you to determine the best way to get out of debt and out from under creditor calls. An 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.
We can meet with you remotely if you have access to Zoom. You can contact Thomas Maronick on his cellphone at 202.288.0167, the law office at 410.885.1775 or through the website for a free consultation.