What is a Chapter 7 Bankruptcy?
Chapter 7 Bankruptcy is a right under federal law to eliminate most of your debt and earn a “Fresh Start”. Although not everyone qualifies to file a Chapter 7 Bankruptcy and be granted a discharge, those that do can stop creditor harassment and emerge debt free.
Will a Chapter 7 Bankruptcy get rid of all of my debts?
Maybe not. Bankruptcy discharges most personal debts. But, there are exceptions. Student loans are almost never dischargeable. Child support or spousal support obligations are not dischargeable. Most government fines are not dischargeable. Whether or not taxes can be discharged depends on a number of facts and timeframes.
How do I know if I qualify for a Chapter 7 Discharge?
You cannot have previously filed a prior Chapter 7 Bankruptcy within the last 8 years and received a Discharge. There is a long calculation called ‘The Means Test Analysis” which must prove that you do not have enough income to even partially repay your creditors. If you have substantial assets that you cannot protect under your Maryland exemptions, you might want to consider filing under Chapter13.
Does my spouse have to file with me?
No. In Maryland, either spouse can file separately. This can be the sensible thing to do if one spouse is burdened by debt and the other has very little debt. In Maryland, your spouse’s assets are not liable for your debts just because you are married.
But I made the debt, how is it right for me not to pay it back?
When you made the debt, you no doubt intended to pay all of it back. But, circumstances change. Job loss, medical problems, and family disruptions are just some of the things that can make people unable to pay back their debts. Your life should not be ruined because you do not have enough money to pay all of your bills. This is why Chapter 7 Bankruptcy exists. To help people who want to pay back their debts, but just can’t because circumstances in their lives have changed.
Should I maybe try credit counseling or a debt consolidation plan instead?
For some people with only a little built up debt, a repayment program through a reputable consumer credit management agency can work. But, your creditors are not legally obligated to participate in these plans. Worse, many of the potential clients we see have been paying into debt management plans for years and have made very little progress. Unfortunately many of the debt consolidation companies that advertise on TV or online have “plans” that only benefit them. They convince you to stop paying your credit cards and send the money to them instead. They promise to then “escrow” your money until there is enough to pay your creditors “pennies on the dollar”. But, many of them pay themselves fees first before your creditors are paid anything. Then, you might call us because you are being sued.
Does filing a Chapter 7 Bankruptcy stop creditors from harassing me?
Yes. The “Automatic Stay” applies to all of your creditors. Once your Bankruptcy case is filed, creditors cannot sue you in state court, cannot send you collection letters, are not even supposed to call you. Wage garnishments are stopped.
Can I get garnished money back?
Depending on how much was garnished and when it was garnished you may be able to get garnished money back. This is not automatic though. You need to have your Bankruptcy paperwork completed correctly and you need to make an effort to retrieve this money.
If I file Chapter 7 Bankruptcy, do I lose everything?
No, nobody loses “everything”. In Maryland there various categories of exemptions. An exemption is an amount of moneyor a thing that you get to keep. Most individuals are able to exempt about $11,000.00 worth of money or property to begin with. But, added categories, such as tools of the trade or personal injury awards, can make an individual able to exempt much more. There is a separate homestead exemption for an owner-occupied residence. And, many married couples benefit from the “tenancy by the entireties” exemption. A capable Bankruptcy lawyer will help you calculate your exemptions so that you keep as much as is legally possible.
Do I have to include my home?
Yes. Your home is an asset and you must include all of your assets. If you have a mortgage on your home, your mortgage is a liability and you must include all of your liabilities. But including your home does not mean you will lose your home. This depends on the amount of equity in your home – the difference between your home’s market value and the balance due on your mortgage or mortgages. There is a homestead exemption and other exemptions that you can use to protect your home.
Do I have to “reaffirm” my mortgage?
No. And it is almost never in your best interest to do so. For most homeowners, their mortgage is their single biggest debt. Why go through Bankruptcy and then still be personally liable for your entire remaining mortgage debt? If home values plummet again, you could be stuck personally owing your mortgage lender thousands more than your home is worth.
But if I don’t reaffirm my mortgage, how do I get to keep my home?
This part seems to confuse everybody. When you got your home mortgage, you signed a “Note”. This Note was your personal promise to pay the lender. You also signed a “Deed of Trust”. This was a lien on your home and gave the lender the right to foreclose on your home if you did not pay. Bankruptcy discharges your personal obligation to pay the lender. But, it does not release the lien the lender has on your home. You can keep your home – but only as long as you still pay your house payments.
Will filing Chapter 7 Bankruptcy stop my home from being foreclosed on?
Yes – and no. Just as soon as your Bankruptcy case is filed, something called an “Automatic Stay” goes into effect. If we file your Bankruptcy before the foreclosure sale happens, the Automatic Stay stops the foreclosure from happening on the scheduled day. But, this reprieve is only temporary. You are still behind in your mortgage payments. Your lender can get a federal court order to go forward and reschedule and hold the foreclosure. If what you want is to catch-up on your house payments, you may want to consider a Chapter 13 repayment plan.
Can I keep my vehicle?
That question really needs an individual answer from your attorney. But, most people who file Bankruptcy do keep their vehicles if they want to. Under current Bankruptcy law, if you want to keep your vehicle and you owe money on it, you must offer to “reaffirm” what you owe. A Reaffirmation Agreement is a form document that must be completed and filed with the Court. Sometimes, if your budget shows that you cannot afford to pay for the vehicle, the Court will order a hearing before granting or denying the reaffirmation. Incredibly enough, right after you receive your Bankruptcy Discharge, some car dealerships will sell and finance a vehicle for you.
Will Bankruptcy ruin my credit?
By the time you are reading these FAQS you already have credit problems. Either you have missed payments or you expect to start missing payments soon. The record of your Bankruptcy does stay on your credit report for a very long time. But for most people who file Bankruptcy, the Bankruptcy improves their credit. If right now, your credit report shows thousands of dollars that you owe and can’t pay, being relieved of that old debt actually helps.
How can I rebuild my credit?
This takes some discipline. Begin by checking your credit reports about six months after your Bankruptcy Discharge. Make sure that all of the discharged debts are shown as discharged. If there are errors in your credit reports, work to get them corrected. The Federal Trade Commission website has good, free information about how to do this. Then, be very careful. Use your credit wisely and make your payments on time. Do not believe anybody who promises you a 790 credit score in 30 days. Don’t waste your time; don’t waste your money.
What is the Chapter7 Bankruptcy procedure?
The truth is, it’s somewhat complicated. You must obtain approved credit counseling. You will need to get quite a number of documents together and provide a lot of information. We prepare your Petition, Schedules, and Statement of Financial Affairs and, after you review them, file them for you. There is a hearing, which is called the “Meeting of Creditors”, although creditors rarely show up. Depending on your case, there may be follow-up required. You must also take a Financial Management Class.
How long does it take?
That depends a lot on you. If you bring us some information and have us begin to prepare your Bankruptcy, then “disappear” for two months, it could take a long time to have your case ready to file. If you get us all the information and documents we need quickly, your case can be filed pretty quickly. About a month after your case is filed, you will have your “Meeting of Creditors”. Then, unless there ae issues, you will receive your Discharge in about 60 days.
What if I have special issues?
Depending upon what the issue is, you might want to file your Bankruptcy in a hurry. For instance, if your wages are being garnished, the quicker your case can be filed, the quicker we can stop a garnishment. Sometimes, though, we hold off on filing cases. If you expect your financial circumstances to chance drastically soon, we might wait until the change happens and we know how it affects you before we file.
Can my case go bad?
Yes. There are ways that your Chapter 7 Bankruptcy case could go very badly. You sign your Petition, Schedules, and Statement of Financial Affairs under penalty of perjury. That means that you promise the Court that everything in them is true and complete. If you lie in your case about your assets or about your debts, you will probably get caught in the lie and then things could go very badly. We spend a lot of time with you to make sure that your Chapter 7 information is true, correct, accurate, and complete just for that reason. Things could also go badly if one of your creditors had a good reason to claim that you defrauded them. Before we file your case, we talk with you about all the past details so that we can guard against this if possible.
Do you give a free consultation?
No. We value our time. We also value your time. Advertised “free consultations” are usually limited to a half hour and sometimes are with a paralegal, not an attorney. We cannot find out all of your specific information in just a half hour, and certainly cannot answer all of your questions. When you come in for your initial consultation, we spend at least an hour with you, maybe more. Usually, a “free consultation” is best case worth exactly what you paid for it, and worst case a waste of your time.
How much does filing for Bankruptcy cost?
This is a question we can’t answer in a FAQS. Your situation is not quite like anybody else’s situation. Your Chapter 7 Bankruptcy case will not be quite like anybody else’s Chapter 7 Bankruptcy case. Would you want a lawyer who would put a fee quote for you on a website FAQS page without knowing anything about you, your concerns, or your problems? Please, be very careful if what you are shopping for is cheap. There are online Bankruptcy “Petition Preparers” who cannot give you legal advice and may not even properly prepare your Petition and Schedules. There are notional websites that have you more or less prepare your own case online and then provide you with a lawyer you have never met. Whether you chose our law firm or another, you really want a knowledgeable, capable lawyer.
How do I know if filing for Chapter 7 Bankruptcy is the right thing for me to do?
Talk to us. We will not try to “sell” you a Chapter 7 Bankruptcy. We will review your finances and your goals with you and talk to you about several alternatives. If you do not need to file a Chapter 7 Bankruptcy – or do not need to right now, we will be honest with you about that.
What will my life be like after Bankruptcy?
Better. That baggage of old debt you have been carrying you will no longer have to carry. Creditors won’t be garnishing your wages, suing you, calling you. You won’t be afraid to answer your phone or open your mail. You will be offered new credit cards to help rebuild your credit. (Go easy on those.) If you rebuild credit carefully, in two to three years your credit should be better than before. A Chapter 7 Bankruptcy Discharge is truly a “Fresh Start”.
This information is intended to provide basic answers to commonly asked questions about Chapter 7 Bankruptcy in Maryland. It is not intended to be individual legal advice nor is it intended to be the practice of law. This information does not substitute for the advice of your own attorney. You need to consult with your own attorney regarding your own specific legal questions. No attorney-client relationship is established through this presentation.
Copyright 2017 by The Law Firm of Shaw & Crowson, P.A. All rights reserved.