GENERAL BANKRUPTCY QUESTIONS

  1. What are the types of bankruptcy protection available under the law?
  2. What are some key terms to know in the bankruptcy process?
  3. Should I file for bankruptcy?
  4. Do I qualify to file for bankruptcy?
  5. If I am married, should I file separately or jointly? If I file separately, will the bankruptcy affect my spouse?
  6. What type of bankruptcy or chapter is best for me and my situation? (explain means testing, types etc)
  7. What types of debt are erased by bankruptcy? What debts cannot be discharged?
  8. Do I need an attorney to file bankruptcy for me or can I do it myself?
  9. Can I get bankruptcy forms on the internet?
  10. If I'm planning on filing for bankruptcy, what should I be doing (or not do) in advance?
  11. How much will it cost me to file for bankruptcy?

THE BANKRUPTCY PROCESS

  1. What happens once my bankruptcy petition is filed?
  2. How soon after filing will creditors stop contacting me?
  3. Will I have to communicate or deal with creditors directly during the process?
  4. Will I have to go to court?
  5. How long does the bankruptcy process take from start to finish?
  6. I know I have to complete a credit counseling course before I can file. Where do I find an approved course and how long does it take?

BANKRUPTCY AND YOUR ASSETS

  1. Will I be able to keep my home?
  2. Will I be able to keep my car?
  3. If I file for bankruptcy will I lose everything?
  4. Will I lose my pension or retirement savings if I file for bankruptcy?

BANKRUPTCY AND CREDIT

  1. What is the overall impact of bankruptcy on my credit?
  2. Will the bankruptcy appear on my credit report and if so for how long?
  3. How long will it take to re-establish credit afterwards?
  4. What happens if I initially forget to list a creditor on my schedules?

MISCELLANEOUS

  1. How will an inheritance affect my bankruptcy case?
  2. If I have co-signed for a loan, what happens if the other party declares bankruptcy?
  3. What happens if my ex spouse files for bankruptcy?
  4. What happens if my tenant files for bankruptcy?
  5. Where do I file if I have moved in the last several months?

GENERAL BANKRUPTCY QUESTIONS

What are the types of bankruptcy protection available under the law?

Answer: The federal law that provides bankruptcy protection for individuals and businesses is known as the United States Bankruptcy Code. Federal law mandates most aspects of the process but state laws also play a smaller part especially when it comes to exemptions and what you can keep. Under this code, there are several types of bankruptcy that individuals and businesses may utilize for a fresh start. Chapter 7, chapter 11, and chapter 13 are the three chapters most often used. See our specific sections on the three types to get an idea of what may best fit your situation or contact us for a free evaluation of your needs.

What are some key terms to know in the bankruptcy process?

Answer:
Automatic Stay
The injunction that goes into effect when someone files for bankruptcy. The stay will stop creditors from any further collection activities against you such as past due notices, phone calls, and/or filing or continuing lawsuits.

Creditor
The individual or business entity who is owed money. The lender.

Debtor
The individual person or business entity who owes money.

Discharge
The release that is granted to debtors at the end of the bankruptcy process. Some debts may not be dischargeable (certain tax debts, students loans, etc.). When a debt is officially discharged, you are no longer liable to pay the debt. In other words, it's a release from your financial obligation and the discharged debts are removed from your credit report. The order is permanent and creditors are prohibited from taking any actions in the future to collect the debt.

Exemption
When filing for bankruptcy, particularly in chapter 7 cases, you often must turn over your personal property/assets to the federal trustee appointed by the court. The trustee decides how to best use the property/assets to pay the creditors involved. Each state allows for some exemptions meaning you can keep a certain amount of our property. See our answer below to "What can I keep?" for specific exemptions that apply to residents of Maryland.

Garnishment
This occurs when a creditor initiates legal proceedings to collect a debt ( a lawsuit) and a judgement is made against the debtor. The court may order that the debtor's employer withhold a certain amount of your wages, typically not to exceed 25 % of the debtor's disposable income.

Schedules
The forms you must fill out when you are preparing your bankruptcy petition that detail income, assets, and other financial information that is relevant to your case.

Secured Debt
A debt that is secured by collateral such as a piece of property. Home mortgages and car loans are examples of secured debt. The lender can take the property back (such as in a foreclosure or repossession action) if the debtor isn't paying according to the original agreement.

Trustee
The court appointed official who will act as the intermediary between the debtor and creditors.

Unsecured debt
A debt that is not secured by collateral or property. Credit cards and medical bills are good examples.

Workout
The process by which a debtor and creditor agree to new terms of payment and/or debt forgiveness. Workouts may occur during the bankruptcy process (chapter 11 or chapter 13 notably) or may be used to avoid the process before it starts. Creditors sometimes are open to negotiating in order to avoid dealing with the bankruptcy process and potential loss should the debtor choose to file.

341 meeting
The meeting of creditors that occurs during the bankruptcy process. The debtor is required to attend and will be questioned by the court appointed trustee under oath. Any creditor who is involved in the case or has a claim is allowed to attend but they are not required to do so. In most instances, creditors do not usually attend.

Should I file for bankruptcy?

Answer: The answer to this question in large part depends on what type of debt you have (secured or unsecured) and your unique financial situation (income, assets). During our free consultation, we can provide some insight to help you decide if bankruptcy is a good option for you as everyone's circumstances vary. Here are a few general tips though to keep in mind when starting this process. Bankruptcy, particularly chapter 7, provides a means to wipe out most of your unsecured debt such as credit cards, medical bills, and utility bills. If you qualify for chapter 7 (see the means test standards) and have a large amount of unsecured debt which you cannot pay back then it may make sense to file. Not all debt is dischargeable so that is a factor. If the bulk of your debt is in student loans, delinquent child support payments, or certain back taxes then bankruptcy may not help you since those types of debt can't be erased by filing. If you own property, such as a home or car, that you wish to keep and want to prevent foreclosure or repossession then chapter 13 is a better option to remedy that situation. You will have to earn a steady income to repay the debt and follow a chapter 13 payment plan set by the court. A large portion of your unsecured debt can typically be eliminated in a chapter 13. However, many chapter 13 filers will still find they may have to pay back a portion of what they owe on unsecured debts as well if their income is considered high enough to do so. Some individuals initially looking to file for bankruptcy will find that it may make better sense to try and work out a deal with creditors first before initiating the bankruptcy process. Many creditors will try and work with you to avoid the risk of not getting paid and to prevent getting mired down in bankruptcy proceedings. It is always a good idea to speak with a debt counselor or attorney during this decision making process as it can be confusing and there are many factors and exceptions that must be considered.

Do I qualify to file for bankruptcy?

Answer: To determine your eligibility for chapter 7, you will be required to apply the means test. Typically, if you are an individual or married couple and your income falls below the median income for your state based on household size, then you qualify automatically. Those with business ownership or interests automatically qualify for chapter 7 relief if more than half of their debt comes from the business and business related expenses. Those wishing to file for chapter 13 relief will need to make sure their debt does not exceed the maximum amounts allowed by law (see chapter 13) and that they have regular income to meet the obligations of their repayment plan.

If I am married, should I file separately or jointly? If I file separately, will the bankruptcy affect my spouse?

Answer: The answer depends on the facts of your particular situation. If you have mostly joint debt and own most of your property together then it may be best to file jointly. There are situations where it makes sense to file separately though. For example, if you accrued large personal debts before marriage and do not own any property together as a married couple. There are multiple factors that need to be addressed and many unique situations. We advise consulting with an attorney or debt counseling service to get a better idea. Two important factors to consider are:

  1. The amount of property and assets owned jointly and separately
  2. The amount of debt that you owe jointly and separately

What type of bankruptcy or chapter is best for me and my situation? (explain means testing, types etc)

Answer: The answer really depends on the specific facts of your situation. Generally speaking, if you are looking to liquidate quickly and qualify, a chapter 7 may be your best approach. If you are a consumer looking to reorganize, keep your house, do not meet the means test, or other certain situations apply, and you qualify, a chapter 13 may be your best approach. If you qualify as a farmer or fisherman, you may want to consider chapter 12. If you are a business looking to reorganize or need time to liquidate your assets, a chapter 11 may be in order. But again, the answer to this question really depends on your particular situation and is fact specific.

What types of debt are erased by bankruptcy? What debts cannot be discharged?

Answer: Generally, unsecured debts are dischargeable. Examples of unsecured debts would be credit cards, medical bills, utility bills, past due income taxes in some cases (there are time period requirements and stipulations however that will apply) and personal loans that are unsecured by property or collateral. Student loans, past due alimony and child support, and judgments against you stemming from wrongful death cannot be discharged.

Do I need an attorney to file bankruptcy for me or can I do it myself?

Answer: It is possible to file for bankruptcy on your own. There is an abundance of information on the internet that can be accessed to help you. But the bankruptcy filing process can be confusing and, if any mistakes are made, you run the risk of losing assets you might have otherwise been able to keep and/or having your petition dismissed. An experienced lawyer who is acting on your behalf will prepare your petition, communicate with the trustee, negotiate with your creditors, attend your 341 meeting to ensure things go smoothly, make sure all laws are being followed, and see the process through to the end. Perhaps the biggest advantage of having an attorney is that he or she will negotiate for you and communicate on your behalf with the trustee and creditors. This is something they do routinely so they are familiar with the various angles and nuances of this process.

Can I get bankruptcy forms on the internet?

Answer: Yes, bankruptcy forms are made available in PDF format to the public by the U.S. Courts website. We tend to discourage self-representation though for several reasons. If your case is dismissed due to misconduct or bad faith on your part (this can happen if you fail to appear in court, disobey a court order, or decide to voluntarily dismiss your own case in response to a creditor filing a motion for relief from the automatic stay) you will have to typically wait a minimum of 180 days (6 months) to file again. Section 109(g) of the U.S. Bankruptcy Code explains this stipulation. If your discharge is denied by the court, you may be prohibited from filing for discharge of the same debts in the future. Especially if you own real estate and are facing foreclosure, the importance of having your bankruptcy filed expediently and smoothly is a necessity. Unless you are willing to invest the time and diligent effort in filing all paperwork carefully and meeting all deadlines coupled with the possibility of having to deal with creditors and/or their attorneys, we suggest engaging a Maryland bankruptcy lawyer to represent you.

If I'm planning on filing for bankruptcy, what should I be doing (or not do) in advance?

Answer: Maintain and collect financial records including your last two tax returns and income documentation (pay stubs for example) that covers at least the six month period leading up to your filing. You will need When filing, your financial activities in the months leading up to your petition will be examined. You may be asked questions regarding any transfers or sales you have made in regard to property and assets. You may also be asked to provide an explanation for any new lines of credit opened or major purchases made in the months leading up to your filing. Keeping in mind that bankruptcy is a privilege provided by law for the honest debtor, you should keep the following in mind:

  1. Do not unload assets or property. Do not give your property to family members or friends.
  2. Do not max out credit cards or run up high balances with the intention of not paying them back.
  3. If you are already struggling financially, you should not take out new lines of credit or make any major purchases, especially luxury purchases, in the months leading up to your filing.

How much will it cost me to file for bankruptcy?

Answer: The filing fee is approximately $300. Attorneys fees and other related charges are billed in addition to the filing fee. If you see an advertisement for an extremely low flat fee, be sure to ask if the fee includes all charges. We charge an all inclusive flate rate so there are no surprises. We are not the highest cost provider nor are we the lowest but we believe that we provide the highest level of service and dedication to our clients and will always strive to attain the best results for you.


THE BANKRUPTCY PROCESS

What happens once my bankruptcy petition is filed?

Answer: Once your petition is filed, you will be assigned a trustee by the court to oversee your case and the automatic stay will go into effect preventing collection efforts against you. In a chapter 7, you will hand over your assets and property to be liquidated. In chapter 13, you will begin your repayment plan. See our Process Timeline for additional information on what to expect.

How soon after filing will creditors stop contacting me?

Answer: Creditors will stop contacting you about a day or two after your petition is filed with the court. Once your petition is filed and your case is opened, the automatic stay goes into effect. Most courts use an electronic notification system to notify creditors of your filing. Notice of the bankruptcy case is given to all creditors whose names and addresses are provided by the debtor.

Will I have to communicate or deal with creditors directly during the process?

Answer: No, your attorney communicates with the trustee and creditors. You may have some direct contact that can occur during the 341 meeting. Creditors are allowed to attend this meeting but they typically don't.

Will I have to go to court?

Answer: In chapter 7, unless an objection is raised in your case, you will not have to go to court. You will have to attend the 341 meeting which generally takes place 20-40 days after filing. It is held in the trustee's office or in a meeting room in the courthouse. The trustee conducts this meeting, not a judge. The trustee will ask you questions regarding your case under oath. For a chapter 13, you must attend the 341 meeting as well as a plan confirmation hearing which will take place in a courtroom.

How long does the bankruptcy process take from start to finish?

Answer: A chapter 7 filing will take about 4-6 months and a chapter 13 repayment plan will last anywhere from 3 to 5 years.

I know I have to complete a credit counseling course before I can file. Where do I find an approved course and how long does it take?

Answer: The credit counseling course must be taken within the 180 day period before you file your petition. It must be administered by an agency approved by the trustee's office. The course can be completed within one day and there are options for those who can't attend an actual meeting, such as telephone options.


BANKRUPTCY AND YOUR ASSETS

Will I be able to keep my home?

Answer: Generally speaking you should be able to keep your home in a chapter 13 if you can continue with your monthly mortgage payments. If you are already in arrears on your payments, then you need to negotiate an arrangement with creditors to make it current. With chapter 7, if you have a sufficient amount of equity in your home then the trustee may decide to sell your home and use the proceeds to pay back your creditors. There is a homestead exemption in the state of Maryland that allows you to exempt $22,975 of your home or real property. As a practical matter, you would typically need to have equity in your home that exceeds the exemption amount to make it worthwhile for the trustee to sell.

Will I be able to keep my car?

Answer: Most individuals find they can keep their car when filing.

If I file for bankruptcy will I lose everything?

Answer: No, you will not lose everything. Exemptions permit some property and assets to be exempted and protected. In the state of Maryland, the state outlines exemptions on what you can keep (will not be liquidated) in a chapter 7. In chapter 13, the exemptions factor into how much you repay your creditors.

Will I lose my pension or retirement savings if I file for bankruptcy?

Answer: No, these benefits are exempted and will not affect how much you have to repay your unsecured creditors in a chapter 13 nor can the accounts be liquidated in a chapter 7. The funds must be in an ERISA qualified pension plan such as a 401(k), 403(b), or IRA. There are caps on traditional and Roth IRA's, but the maximum amounts are fairly high and will not be a factor for most people.

BANKRUPTCY AND YOUR CREDIT

What is the overall impact of bankruptcy on my credit?

Answer: Bankruptcy will generally help your credit score. This is because creditors know that you can only use the silver bullet of bankruptcy once every eight years (in the case of chapter 7) and that you have just wiped out most, if not all, of your unsecured debt, so that they are getting you with a clean slate. Bankruptcy may have a negative impact on your score at first, especially if your delinquent debt has not yet made it on to your credit report. When creditors see a bankruptcy on a report, they will most likely take into account how long ago it was and allow you to explain the circumstances. This negative impact will lessen over time as you re-establish your credit, act fiscally responsible, and begin paying bills on time. In the end, the overall impact is generally positive but it does take time to achieve. If you are considering filing for bankruptcy, your financial situation and credit is most likely in some disrepair already. It will continue to be negatively impacted as you miss due dates and don't pay bills. You could also run the risk of losing secured property, such as your home. In general terms, if your credit score is already low, you are being turned down for new credit, and your debt is too high in comparison to your income then bankruptcy will most likely not affect you in a major way and could be in your best interest in the long run.

Will the bankruptcy appear on my credit report and if so for how long?

Answer: Yes, a chapter 7 will stay on your report for about ten years and a chapter 13 will stay for around seven years. While a bankruptcy is viewed as a negative item on your report, you have to weigh the possible benefits as well. Your unsecured debt can be greatly reduced or in some cases even eliminated. This means many of those negative items that can build up on a credit history and bring your score down will be removed, which is why bankruptcy is often called a "fresh start". If you already own your home and vehicles, then you most likely will not need new loans for those items in the near future and the bankruptcy might help protect those items from your current creditors. If your score is already low, you are unable to qualify for new credit and you are having trouble making payments on current bills, then bankruptcy may be a sensible option. In this situation, an already low score will be pushed down by filing but typically not that much to make a huge difference. If you are expecting a financial windfall such as an inheritance, promotion, or maturation of an investment, then you need to take that into account as well because you may be able to avoid filing. You will need to make a personal decision based on your situation and weigh your options. A consultation with a trusted attorney can aid you in the decision making process.

How long will it take to re-establish credit afterwards?

Answer: The answers to the previous two questions will help shed some light on this aspect of bankruptcy. The bankruptcy itself will stay on your report for seven to ten years. With the passage of time, the effects usually become less significant as long as you take the fresh start seriously and act carefully with your finances. Steps to rebuilding your credit after bankruptcy may include: setting up a budget and sticking to it, getting a secured credit card which you may eventually be able to transition to an unsecured account over time, paying all bills on time, monitoring your credit report, opening new checking and savings accounts, and trying to build up your savings.

What happens if I initially forget to list a creditor on my schedules?

Answer: In a chapter 7 case where there were no assets, it would still be a dischargeable debt. A no asset case would mean no property or assets were liquidated and no funds were disbursed to creditors. If it were a chapter 7 or 13 where there were assets or property liquidated by the trustee to pay creditors, then the debt would still be valid and would not be discharged. For this reason, we work very carefully with our bankruptcy clients to make the schedules as accurate and thorough as possible.

MISCELLANEOUS

How will an inheritance affect my bankruptcy case?

Answer: If you received an inheritance ( property, securities, or cash) in the 180 day period before or after filing for chapter 7 it will be considered part of the bankruptcy estate. The trustee will most likely choose to confiscate the inheritance and disburse the proceeds to your creditors. You may have exemptions you can apply to the inheritance to save it so you can keep it. In Maryland, for example, you could use your wild card exemption of $6,000 to exempt a cash inheritance valued at $6,000 or less. If you inherit a home and don't own one already then you could apply the Homestead exemption of $22,975 (the exemption can be doubled in Maryland for a married couple filing jointly up to $45,950). In chapter 13, you will have to report any inheritance you receive during the three to five year term of your plan to the trustee handling your case. You may be ordered by the court to pay the value of the inheritance amongst your unsecured creditors which would translate into a higher payment amount. The premise of this action is that your unsecured creditors should be paid at least what they would have received if you had filed a chapter 7 case. For example, if your parent passes away and leaves you a house valued at $100,000 then you may be asked to pay that amount into your plan over the three to five year repayment period. One important thing to note is that the 180 day period applies to when the decedent passed away not when you are actually going to receive the inheritance. If your parent passed on July 1st, 2013 but probate does not finalize until several months later, the 180 day period starts 180 days before July 1st and ends 180 days after.

If I have co-signed for a loan, what happens if the other party declares bankruptcy?

Answer: If you are the co-signer on a loan and the principal signer decides to file bankruptcy, they will be discharged of the debt but you could still be responsible for the debt.

What happens if my ex-spouse files for bankruptcy?

Answer: If your ex-spouse files for bankruptcy and you own any joint property together or are listed as co-debtors on any loans, then you can be held responsible as a co-debtor. If you do not own any property jointly or have any shared loans then it should not be an issue for you.

What happens if my tenant files for bankruptcy?

Answer: When your tenant files for bankruptcy and the automatic stay goes into effect, landlords are considered creditors and must abide by the laws mandated by the automatic stay. We have experience handling landlord-tenant disputes and considerable bankruptcy experience across a myriad of situations. Contact us for a specific evaluation of your unique situation.

Where do I file if I have moved in the last several months?

Answer: While a little more complicated in some situations, as a general rule you should file in the state where you resided during the majority of the 180 day period before your filing.

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