What is Bankruptcy?
Bankruptcy is a legal proceeding conducted in Federal Bankruptcy Court
which allows a person who has more debt than he or she can pay (called a
"debtor") to seek relief from those debts and collectors of those debts
Under Federal Law, you (or your spouse jointly) are entitled to file a
Bankruptcy Petition to restructure and reduce or eliminate your debts
and obtain a fresh financial start. Under the Bankruptcy Laws, you are
entitled to file a Petition with the Court allowing you to keep your
home, your car and your personal belongings from being sold without your
Most personal Bankruptcies proceed under either Chapter 7 or 13 of Title
11, United States Code. Under either of these Chapters, the moment your
Bankruptcy Petition is filed you are given immediate debt relief and are
protected by the "automatic stay", which prohibits your creditors from
attempting to collect their debt, including taking legal action,
garnishment of wages, foreclosure or repossessions of property or
Bankruptcy can stop:
Which type of Bankruptcy is right for me?
If you have decided to relinquish your home, a Chapter 7 will discharge
and eliminate any remaining balance that is owed to your mortgage
company after the sale along with many of your other debts. If you have
decided that you would like to keep your home, a Chapter 13 will enable
you to do so. To determine if Bankruptcy is right for you, you should
seek legal advice from a licensed professional. Our office offers an
initial free consultation. During this consultation you will meet with a
professional who will advise you with respect to your particular
situation. If bankruptcy is not right for you we will advise you as to
any other options you might have.
What are the Consequences of Bankruptcy?
Bankruptcy may appear on a person's credit report for up to ten years
and may interfere with that person's ability to obtain new credit in the
future. However, a person contemplating Bankruptcy most likely has a
poor credit rating to start with. In these cases, Bankruptcy may
actually improve his or her ability to get credit, since many of that
person's former debts will have be eliminated. We will show you ways to
rebuild your credit rating using proven techniques.
Types of Personal Bankruptcy
Chapter 7 Bankruptcy, also known as "liquidation", involves a possible
Court-administered sale of any of the debtor's property that is not
exempt. In the State of Maryland, each Debtor is permitted to exempt at
least twelve thousand dollars ($12,000) of property in the State of
Maryland. Married couples filing jointly can exempt at least twice that
amount. If you recently moved to Maryland from another state, your
exemptions amounts may differ and you may be eligible to use Federal
If you are not interested in keeping your property, a Chapter 7 would
enable you to eliminate any remaining balance that is incurred after the
sale of your home by your mortgage company, along with any of your
bills, such as credit card debt, personal loans, medical bills, or even
overdue utility bills. Under this proceeding, you pay nothing to these
creditors, giving you a fresh financial start.
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Chapter 13 Bankruptcy, also known as a "reorganization or "wage-earner
plan", allows a person to pay off debts under an installment payment
plan administered by a Court-appointed Trustee. Chapter 13 is most
helpful to you if you are behind in payments on a house, a car or other
property that is subject to foreclosure or repossession.
In a Chapter 13 proceeding, you submit for the Court's approval a three
or five year plan and budget under which you propose to repay your
creditors. Once all of these payments have been made, most of your debt
will be discharged. This plan will allow you to pay off past due
mortgage payments on your home at a rate you can afford. The plan also
allows you to cure defaults on auto loans, taxes and to certain other
debts, and can either reduce or eliminate any of your other debts, such
as credit card debt, medical bills, personal loans, utility bills, etc.
As is the case with Chapter 7 Bankruptcy, your are protected by the
?automatic stay? throughout the course of your Chapter 13 case. Your
creditors are prohibited from starting or continuing any collection
action, and any adverse actions directed against you and your property
must cease. This protection remains in effect so long as you adhere to
your scheduled payment plan.
In order to qualify for Chapter 13 relief, you must have "regular
income", which may be from a Salary, Commission, Rents, Pension,
Alimony, Child Support, Social Security, Unemployment Compensation or
Chapters 11 & 12
Chapter 11, although commonly used in connection with business
reorganizations, is available in some cases to individual debtors with
large amounts of debt and in special circumstances Chapter 12 is similar
to Chapter 13 but is reserved for "family farmers".