Click Here to Schedule Your Free Consultation

Life is hard, and sometimes things take a turn for the worse financially. If you find yourself paying more than you can afford, trapped in massive debt, you may need to consider filing for bankruptcy. We know that is a scary word: but we are here to help. Read on to learn more about:

  • Maryland Bankruptcy 101: Things to Know About the Overall Process;
  • The Absolute Don’ts of Bankruptcy and How to Avoid Them; and
  • Getting the Help of a Bankruptcy Attorney: Getting the Leg-Up on Your Future.

A Comprehensive Look at Maryland Bankruptcy

First, you should know there are two types of bankruptcies:

  • Chapter 7 bankruptcy is the more popular option for its expedience and cost-effectiveness. It does not feature a payment plan, which means if you are behind on payments, there is a good chance you will have to forfeit additional assets. For this reason, Chapter 7 suits those with essential items rather than those with luxury assets, because you could lose more. If a bankruptcy exemption does not cover a piece of property in question, you will lose it.
  • Chapter 13 bankruptcy utilizes a 3-to-5 year repayment plan. There are a few upsides to Chapter 13, like the ability to keep your property throughout by opting for a payment plan to get you back on track. Shoving your payments into a span of less than a decade might be costly, though, and because of this, people who have less mobility and property might not choose this option. If a bankruptcy exemption does not cover a piece of property in question, you will pay for it.

It is important to know the difference and contextualize each when moving forward in the process.

To declare bankruptcy, you have to qualify for bankruptcy, and Chapters 7 and 13 have their qualifications.

For Chapter 7, the best way to test eligibility is to compare your gross income to that on the U.S. Trustee’s website. If your family’s gross income is lower than the median income for a family of the same size in Maryland, you qualify for Chapter 7.

For Chapter 13, you will need to have a certain level of debt alongside earning a regular income. Your debt secured by collateral cannot exceed $1,257,850, while your unsecured cannot exceed $419,275. In addition, you need to be able to afford the monthly payment associated with your payment plan, which may involve your nondischargeable debt, the value of any nonexempt property, or your disposable income.

It is also good to check just how many debts bankruptcy might erase. There are many it cannot, like arrearages and tax debt, but there is a substantial amount it can, like credit card and medical bills and overdue loans and payments. This is contingent on your debts, though, and thus a very person-to-person matter.

Exemptions are also very important when it comes to knowing what you will and will not lose in bankruptcy. Maryland is a state that requires you to use its own list of exemptions rather than the federal government’s; however, if you qualify, you may also file for Federal Non bankruptcy Exemptions. In addition, you can protect retirement accounts and IRAs through both Chapter 7 and 13.

This may not seem fully reassuring, considering how much work it takes and what you may lose in the process; however, you should not panic. Even if you do, consider the following.

Things You Should Not Do When Approaching Bankruptcy. 

Financial stress causes a person to do some impulsive (and even regrettable) things. It’s understandable if you feel cornered by debt and wants to take any route possible that will lighten the load, but you need to keep yourself somewhat grounded. There are definite dos-and-don’ts when it comes to addressing financial burdens, and especially with avenues like bankruptcy, you do not want to rush the process.

A bankruptcy discharge releases you from your debts, but it is only a temporary cure-all. If you file under Chapter 7, you can only receive a discharge once every eight years. That said, it might not be a good idea to file if there are additional extenuating circumstances at play in your life that could lead to you accruing additional debts post-discharge.

You will want to play it right, though; do not wait too long or act too quickly. If you can talk with an accountant or financial lawyer, they can help you strategize a time that works best for you and fits your trajectory.

Like we said: cooler heads prevail. It is against your better interest to lie to authorities, underreport income, hide or move assets, or knowingly misrepresent your circumstances. Where does that land you? In jail, probably—or heavily fined.

Even so, there are penalties for not being prompt or thorough in your filing. If you do not submit every necessary piece of paperwork, you may face filing more papers and paying more fees to correct the mistake: putting yourself farther between your financial problems and solutions.

Your family might be there to help, but if anyone offers to ‘take care’ of your property while you’re enduring bankruptcy talks, hold onto it. You should not transport assets ahead of bankruptcy because transparency is key when communicating with the courts. On top of that, there is a chance you will even lose your property if you transfer it. Why? Because it’s illegal.

In any case, there are many things you should not do during bankruptcy that your lawyer can guide you through. You might want to make understanding that your first priority before acting on any official and binding plans.

How an Attorney Can Help You File for Bankruptcy 

Along with the aforementioned ways a lawyer can help you with bankruptcy-related matters, you can also expect your lawyer to help you find the best plan of choice for your future. That includes when you should file, which chapter you should file for, the property you will keep, and how you’ll do it legally.

Your creditors—the recipients of bankruptcy payments based on their claims—may try and contact you throughout the process. Having a lawyer on your side gives you someone to defer questions to so you can stop worrying about unsolicited calls.

There is also a lot of paperwork you need to file—including tax returns, proof of income forms, copies of personal identification, and anything asset-related a trustee may request. Your lawyer can help walk you through this process and make sure you’re as thorough as possible as not to incur any further penalties.

All-in-all, a lawyer will make sure your case is heard rather than dismissed. They’ll make sure your property is kept, not lost. They will keep your future open rather than closed.