Chapter 7 Maryland Bankruptcy - Frequently Asked Questions
How is Chapter 7 bankruptcy different from Chapter 13?
Chapter 7 bankruptcy is typically for people who have little or no assets. If you qualify, all of your unsecured loans (e.g., credit cards) can be discharged. Chapter 13 bankruptcy is more suitable for individuals who have a steady income, but cannot afford their monthly payments. In this type of bankruptcy, your debts are restructured over a longer period of time so that you can afford the monthly payment. If you have significant equity in your home and are facing foreclosure, Chapter 13 can cease the foreclosure.
Am I eligible to file for Chapter 7 bankruptcy?
In order to qualify for a Chapter 7 discharge you must pass one or both parts of the "means test". To pass the first part, your annual income as well as average monthly income of the last six months must not exceed the IRS-specified value for your household size. If you do not pass this part, you may qualify by passing the second part based upon your disposable income. To pass the second part, your income must be below these specified values AFTER subtracting exempt expenses such as mortgage or rent, food, and transportation.
Will I lose my assets?
A certain amount of your assets is protected under law. In Maryland, $11,000 of any assets can be kept, and $1000 of household goods can be kept. Additionally, roughly $23,000 of your home equity is exempt. If your assets exceed the allowable exempt amount, you or the bankruptcy trustee must liquidate these items, or consider a Chapter 13 bankruptcy.
Can I stop creditors from bothering me?
Yes. Once you have hired a Maryland bankruptcy attorney, you must notify any debtor that contacts you that you have retained counsel. Tell them your attorney's name and phone number. You do not have to answer any further questions. Once a debtor has been instructed that you have hired an attorney, he or she is no longer legally allowed to contact you - this is called an "automatic stay".
Which debts cannot be discharged?
Not all debts can be discharged with a Chapter 7 bankruptcy. These include trust fund taxes, child support, alimony payments and certain past tax bills. Student loans are rarely discharged unless, for example, you can prove that you have long-term health problems that prevent you from being able to work. Past taxes can be discharged, but only those that were due at least three years before your bankruptcy filing date.
Additionally, creditors have the right to object to the discharge of certain unsecured debts, such as large purchases or cash advances made within 90 days of filing. And any cash advance of $750 or more taken within 70 days before filing is also considered non-dischargeable.
When do I have to stop using my credit cards?
Once you have a reasonable expectation that you are going to file bankruptcy, you should stop using your credit cards. Generally speaking, you should not use your credit cards 90 days before you file, especially for luxury items. Debts considered to be luxury goods and aggregating more than $500 are nondischargeable.
How long before I get my credit back?
A Chapter 7 bankruptcy typically stays on your credit report for 10 years. However, there are many ways to repair your credit, and it's not uncommon to have a reasonable degree of credit within 2 years of filing. We will educate you on how to accomplish this.
Do I have to go through credit counseling before I file?
Yes. You must receive credit counseling from an agency approved by the U.S Trustee's office within the 180-day period before you file your bankruptcy. Once you complete the counseling, the agency will give you a certificate of completion that we must file no later than 15 days after your bankruptcy filing date.
Additionally, you (and your spouse if you file jointly) must take a personal financial management course from an agency approved by the court before you receive your final discharge. Both the pre-bankruptcy and pre-discharge courses can be taken online.