Complete The Bankruptcy Forms
Filing bankruptcy in Maryland involves a lot of paperwork. The forms that need to be filed with the court to commence your Maryland bankruptcy case are your chance to explain your financial circumstances to the court and your case trustee. It’s important to be diligent in completing the forms, as you are signing everything under penalty of perjury. The federal judiciary has released a detailed instructions manual for the forms that are needed to file an individual Chapter 7 bankruptcy in Maryland. If this seems like a lot to handle on your own, see if you are eligible to file using Upsolve. In that case, we’ll take care of the legwork needed to add your facts of life to your bankruptcy forms. One of the documents that you are required to prepare as part of your Maryland bankruptcy is a creditors’ mailing matrix. Basically, it’s a list of all of your creditors’ addresses that the court can easily turn into address labels. This is not done by adding the information to a specific form. The Maryland Bankruptcy Court has to creating this creditors’ mailing matrix that everyone filing bankruptcy in Maryland can use to ensure this is done correctly.
How Will Filing Bankruptcy Affect My Credit
The way that bankruptcy filing can affect someones credit depends on how their credit was prior to filing. If you are delinquent on a number of accounts, your credit score is most likely already decreasing each month with the negative reporting on your credit. If you file personal bankruptcy with a credit score that is already going down, your score will not be affected drastically. On the other hand, if you have a good credit score prior to filing, you will see a more dramatic hit on your credit score post-filing.
A bankruptcy filing may stay on your credit report for up to ten years, but there are ways to help build up your credit score even with the filing on your report.
Dealing With Your Car
Your car plays not one but two parts in your Maryland bankruptcy case. First, everything you own, including your car, is considered an asset that must be disclosed on your Schedule A/B. If you own the car outright, then everything stays the same as long as the car’s value is less than the exemption you can claim on your Schedule C. If you have a car loan that you are still paying on when filing Chapter 7 in Maryland, you can decide how you want to handle it. If a review of your budget makes it clear that you won’t be able to afford the vehicle, even after you are relieved from having to pay your other debts, you should surrender the vehicle. Otherwise, you are just setting yourself up for future financial hardship. If the loan is affordable, and the car in good condition, you can choose to keep everything basically the same by entering into a reaffirmation agreement. Finally, some folks filing Chapter 7 in Maryland are able to get out of a bad car loan for a good car through a process called redemption, where they make a lump sum payment in an amount equal to the value of the vehicle. This is particularly useful if you originally traded in a car with a loan balance left on it, and rolled that negative equity into this loan, but it does require you to come up with a significant amount of money shortly after your Chapter 7 bankruptcy in Maryland is filed.
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Should I Pursue A Chapter 13 Bankruptcy Case In Maryland
In short, deciding to file a Chapter 13 bankruptcy case in Maryland can be overwhelming. Before you file bankruptcy, you may want to estimate your Chapter 13 plan payment that you can compare against your current monthly debt obligations. You can compare that plan payment estimate to your Chapter 13 bankruptcy alternatives below.
Understand The Differences Between Chapter 7 And Chapter 13
Chapter 7 and Chapter 13 bankruptcy are the most common consumer bankruptcy filed in the United States. You need to know the difference because one chapter is more expensive and also often takes much longer.
Chapter 7 Bankruptcy in Maryland
A Chapter 7 bankruptcy is referred to as liquidation bankruptcy. In many cases, bankruptcy filers do not lose their home or vehicle by using bankruptcy exemptions. We will cover how your belongings may be at risk below.
Heres what you need to know about filing Chapter 7 bankruptcy in Maryland.
Chapter 13 Bankruptcy in Maryland
A Chapter 13 bankruptcy is known as a wage earners plan. In many cases, you will pay back a portion of your unsecured debts in a payment plan.
Heres what you need to know about filing Chapter 13 bankruptcy in Maryland.
For more information, you may consider reading, Is it better to file Chapter 7 or Chapter 13? and Is Chapter 13 Worth It? You should also consider the pros and cons of bankruptcy.
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If I File Bankruptcy Will I Ever Have Credit Again And How Can I Rebuild
Yes, you will have credit again. After being discharged in a bankruptcy case, your credit will begin to rebuild over time. When the negative reporting stops on debts that have been discharged and you make timely payments on post-bankruptcy obligations, your credit score will improve. Other aspects that can help improve your credit score are keeping your debt to income ratio low, making monthly payments, and when the time is right, getting a credit card that you pay off each month.
Qualifying For Bankruptcy In Maryland
If you’ve never filed for bankruptcy before, you’ll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.
You’ll also need to meet specific chapter qualifications.
You’ll qualify for Chapter 7 bankruptcy if your family’s gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee’s website .
Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the “means test.” If, after subtracting expenses, you don’t have enough remaining to pay into a Chapter 13 plan, you’ll qualify for Chapter 7.
Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can’t afford the monthly payment. To qualify, you’ll pay the larger of:
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Chapter 7 Bankruptcy Maryland
As Chapter 7 is the most common consumer bankruptcy filing, we will cover this bankruptcy first. In order to file Chapter 7 bankruptcy, you have to go through means-testing. The means test was added to the Bankruptcy Code in 2005 to prevent bankruptcy fraud. The income requirement for Maryland helps ensure that a person with a sufficient income to pay back some of the debts may file a Chapter 13 instead of Chapter 7.
Maryland Credit Counseling And Debtor Education Courses
As part of your Chapter 13 case in Maryland, it is a requirement to complete two bankruptcy courses. The bankruptcy courses are available online from approved companies for a small fee. Moreover, the courses typically take between 90 minutes and two hours to complete.
Here are the approved providers in Maryland:
Accordingly, its a good idea to check to make sure you are using the most recent list of approved providers.
The Credit Counseling Course needs to be complete before you file a Chapter 13 bankruptcy. Also, you need to complete the Debtor Education Course after filing the Chapter 13 bankruptcy petition. It is a good idea to complete the second bankruptcy course as soon as possible after filing the Chapter 13 case so that you do not forget about the course and lose your bankruptcy discharge.
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Working With An Attorney
Generally speaking, it is usually in ones best interest to work with a bankruptcy attorney. A bankruptcy attorney is there to represent you and not in the interest of creditors.
An attorney is also accustomed with exemption laws. Plus, they can come up with creative strategies to keep your assets through practical repayment strategies that are fair to everyone involved.
While you may have the fight and ability to manage a Bankruptcy on your own, it tends to make things a lot easier on an already stressful situation, especially when there is so much at stake.
How To File Bankruptcy In Maryland For Free
People who need to file a Chapter 7 bankruptcy in Maryland sometimes are in such financial distress that even the $338 court filing fee is more than they can handle. If you identify with this sentiment, you can ask the court to waive the fee, and as long as your income is less than 150% of the federal poverty guidelines you may end up filing bankruptcy in Maryland for free.
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What Happens If Youre Granted Chapter 7 Bankruptcy In Md
If the bankruptcy court agrees to grant you Chapter 7 bankruptcy, its called a discharge.
A discharge releases you from personal liability for most debts. Your former creditors cant take any more collection action against you, either.
There are a few exceptions, but for the most part, youll have the fresh start you deserve.
Some Benefits Of Bankruptcy
As mentioned, most people experience financial difficulty because of events that are beyond their control. These events trap people in a downward spiral of debt and delinquency. Bankruptcy reverses this downward spiral and gives you control over your own finances. The automatic stay is a big part of this reversal. Section 362 of the Bankruptcy Code immediately stops adverse creditor actions like:
- Signature loans
This federal debt relief program also gives a bankruptcy lawyer a chance to negotiate from a position of strength. When debt negotiations begin, creditors know they must agree to a favorable deal that reduces your interest rate, forgives some of the UPB , or provides other relief. Otherwise, the judge could discharge the debt, leaving them with virtually nothing.
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Filing Bankruptcy Alone Vs Filing With An Attorney
Current laws do not require filers to hire an attorney to declare bankruptcy relief. People are permitted to represent him or herself as a pro se debtor. You will simply contact the local bankruptcy court and obtain all forms and requirements directly through them. Going it alone is not for the faint of heart.
A Maryland Trustee Is Assigned To Your Bankruptcy Filing
A bankruptcy trustee is assigned to your bankruptcy case to review the paperwork and look for non-exempt belongings that you may own. You have to submit such forms as a recent tax return to the trustee. If you have non-exempt belongings, the trustee may manage the sale and liquidation of those belongings.
See the Chapter 7 and Chapter 13 trustees in Maryland for bankruptcy district, name and contact information. As a Chapter 13 bankruptcy is much longer, you may have more interaction with the Chapter 13 trustee or someone from his/her office.
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Make Sure You Are Eligible
There are qualifying standards that must be met before you can file for either Chapter 7 or Chapter 13 bankruptcy and it makes sense to do research to see what form of bankruptcy you are eligible for.
To be eligible for Chapter 7 bankruptcy, an individual must pass a means test that determines if their income is at or below the median income for their state. If not, they may have to file additional paperwork or switch to Chapter 13 bankruptcy.
To be eligible for Chapter 13 bankruptcy, an individuals unsecured debt must be less than $419,275 and secured debts of less than $1,257,850.
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Appointment Of A Trustee
After the petition is filed, the court appoints a trustee. Then, the bankruptcy clerk provides notice of the bankruptcy proceedings to all creditors provided by the debtor. The trustee is responsible for administering the case and liquidating the debtors non-exempt assets to pay off any debts owed. He/she has a duty to maximize the money paid to the debtors unsecured creditors by selling all non-exempt property at fair market value. The trustee has the power to recover money or property under the trustees avoiding powers. These powers enable the trustee to:
- Set aside preferential payments to creditors made within the 90 days before filing the bankruptcy petition
- Disregard security interests that were not properly perfected under state law when the petition was filed
- Pursue claims, such as fraudulent conveyance suits, as permitted under state law
Sometimes there are no assets for a trustee to liquidate because all of the debtors assets qualify as exempt property. In such instances, the trustee may exercise the trustees avoiding powers, or the trustee may simply file a no asset report with the court. In that case, any unsecured debts will be forgiven with no distribution to the creditors.
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Means Testing In Maryland
As part of the bankruptcy process, you must complete the . The Means Test calculates your average monthly income , annual median income, and disposable income. Consequently, each of these figures is important for a Chapter 13 case.
Calculating Average Monthly Income
Your average monthly income is calculated using all household income received during the six months before filing a Chapter 13 case. Then, the total of all income over six months is divided by six to determine your AMI.
To calculate your annual median income, you multiple the AMI by 12. The annual median income is used in a Chapter 13 case to determine whether you are required to submit a 60-month bankruptcy plan.
If your median income exceeds the Maryland median income levels, you must submit a 60-month plan. Alternatively, if your median income is below the Maryland median income, you may qualify for a 36-month bankruptcy plan. Although, you may still choose to propose a 60-month plan based on your specific situation and needs.
The median income in Maryland for bankruptcy cases is based on information gathered by the United States Trustees Office. Also, the USTs office revises the data periodically to ensure it reflects the current income for each state. Furthermore, you can view the current median income figures used for Maryland Chapter 13 cases by clicking here.
The latest figures are for cases filed on or after May 15, 2021.
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Calculating Disposable Income For A Chapter 13 Plan
There is a second part of the Means Test that calculates your disposable income. In most cases, all disposable income must be contributed to a Chapter 13 plan to repay your unsecured creditors. Unsecured creditors typically receive a small percentage of the money owed to them through a Chapter 13 plan. Comparatively, most unsecured debts are forgiven or discharged upon the successful completion of your plan.
However, only certain living expenses may be deducted from your average monthly income. Although, most required payroll deductions are included in the allowable expenses. The United States Trustees Office publishes a list of the living expenses that are allowable based on the size of your household. Its important to note, these expenses are restricted to a maximum amount. For example, these expenses include food, clothing, household supplies, and out-of-pocket health care expenses.
If your expenses exceed the maximum amount or you have special expenses, you need to request approval of those expenses and provide proof of the expenses to the court.
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Which Type Of Bankruptcy Should I File
For personal debts, most people file for Chapter 7 bankruptcy.
Chapter 7 bankruptcy is quicker and simpler than a Chapter 13 bankruptcy. Chapter 7 is likely to be the better choice if:
- most or all of your property is exempt and
- the debts that are creating problems for you will be discharged under a Chapter 7 bankruptcy.
In some cases, most of your debt cannot be eliminated by any bankruptcy. These debts include alimony, support, recent income tax debt and certain criminal penalties. Details on these special debts.
You want to pay your creditors back but just need to relieve the pressure now. Chapter 13 bankruptcy will allow you to spread the past-due payments over a 3-5 year period, if you can keep current.
You want to protect someone who co-signed on the debt with you.
- Under Chapter 13, the creditors will not pursue your co-signer while you are making regular payments.
- Under Chapter 7, the creditors will pursue your co-signer to pay the debt in full.
If you have filed for bankruptcy before, the type of bankruptcy you had before will determine when you can file again. You cannot file under Chapter 7 if you received a Chapter 7 or Chapter 13 discharge within the past 8 years. You can file under Chapter 13 in any of the following circumstances:
However, after receiving a discharge under Chapter 7, you must wait at least 4 years before you can file for a Chapter 13 Bankruptcy.
You are behind on your mortgage or car loan .
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