Financial hardship is extremely stressful, regardless of its causes. And no matter how hard you try to change course, you may feel you are trapped on a one-way street. Some people hesitate to claim bankruptcy to avoid its stigma. But when you're overwhelmed with debt, you have far more to gain than lose by filing for bankruptcy. And there is no reason for friends, family, or colleagues to ever know about it. As for financial stigma, claiming bankruptcy can impact your credit score, but you'd be surprised how fast you can bring it back up again.
Congress created the bankruptcy option to help hard-working citizens such as yourself deal with life's inevitable complications. A successful bankruptcy claim will eliminate or consolidate your debt, allowing you to get a fresh financial start. Don't hesitate to exercise your legal rights. There is hope, and you don't have to go it alone. An experienced bankruptcy attorney can put you back in control of your finances and get you started on your recovery.
There are two types of bankruptcies you can choose from—Chapter 7 and Chapter 13. The option that is right for you will depend on your financial status. A Chapter 7 bankruptcy yields a full forgiveness of debts when the debtor has few or no assets and/or a very low income. A Chapter 13 bankruptcy allows higher-income debtors to hold on to their property and assets while they slowly pay off creditors.
Both Chapter 7 and Chapter 13 bankruptcies can stop creditor harassment, protect against foreclosures, wipe out credit card debt, discharge debt due to divorce, eliminate medical debt, consolidate alimony and child-support payments, prevent wage attachment, provide tax-debt relief, and allow you to rebuild your credit.
When a tenant is unable to keep up with rent payments, he/she may be served with a complaint from his/her landlord. If the tenant immediately files for bankruptcy, however, he/she can stave off an eviction with an automatic stay. The stay begins the moment the bankruptcy petition is filed, making it illegal for the landlord to proceed with the eviction (barring an exception from the judge) until the court has made a ruling about your bankruptcy claim. That extra time can be critical for a debtor and his/her family.
On the other hand, if a landlord obtains a judgment of possession before a debtor files for bankruptcy, the automatic stay is not nearly as effective. But even in that case, U.S.C. Title 11 ensures that a debtor can delay an eviction for up to 30 days, simply by paying the court the rent that's due for that 30-day period. If the debtor is also able to cure the entire rent arrears during that 30-day period, the eviction can be stopped entirely. If not, the landlord can proceed with the eviction as soon as the 30-day automatic stay expires. This doesn't give the debtor a lot of time to prepare, but it's better than no time at all.
Homeowners also have plenty to gain from a bankruptcy. But there are a few more things to keep in mind. For example, if you're a homeowner considering a Chapter 7 bankruptcy in Maryland, be aware that the Homestead Exemption is not very generous. Maryland allows an exemption on the first $23,675 of your equity. Any amount of equity over that is considered to be an asset.
For example, if you had a house with $100,00 in equity, the first $23,675 of this equity would be off-limits to your creditors. But the remaining $76,325 of equity could be seized to pay off your debt. That means a bankruptcy trustee would have the right to seize your house and attempt to sell it.
If, however, you own the house with your spouse as tenants by the entirety, and your spouse is neither filing for bankruptcy nor sharing any unsecured debt with you, then your house will be totally exempt, regardless of your equity. If you do share unsecured debt with a spouse, a bankruptcy trustee can demand that you turn that equity over to the bankruptcy estate. Failure to do so could mean that you will lose your house. So make sure you get an accurate valuation of your house to determine the amount of equity you have in it. This will help you make an informed decision about filing a Chapter 7 bankruptcy.
If you're a homeowner considering a Chapter 13 bankruptcy, be aware that the court does not encourage repeat customers. Homeowners in debt can't stave off foreclosure indefinitely through multiple bankruptcy filings. Homeowners can take advantage of the same automatic stay renters enjoy when filing their first Chapter 13 bankruptcy in a given year. But if they want to file a second one in that same year, the automatic stay is limited to 30 days. After that, the mortgage bank can proceed with foreclosure.
With the help of an attorney, however, you can request a hearing to share with the court how your current financial situation is more likely to benefit from a Chapter 13 bankruptcy than the one that prompted your first Chapter 13 bankruptcy. The court can then extend the automatic stay for the full length of the Chapter 13 proceedings, ensuring your home is safe from foreclosure.
If a homeowner wants to file a third Chapter 13 bankruptcy in that same year, there is no automatic stay at all. Filing a fourth Chapter 13 in a single year is not allowed.
The Truth, The Whole Truth, and Nothing But the Truth
The old adage, "honesty is the best policy" really applies to bankruptcy. This is especially true during what's known as the 341 meeting of creditors, a required court appearance during which you must present all financial documents relevant to your bankruptcy claim, such as tax returns, paystubs, etc. At the 341 meeting, these documents must be given to the bankruptcy trustee who will then verify the accuracy of the documents. The debtor is expected to answer all questions during this proceeding while under oath.
If it is later determined that you hid any assets or information, you could have your bankruptcy dismissed, or worse. For example, if a homeowner sold his/her house within one year of filing for bankruptcy, he/she is expected to disclose that sale, as well as any profit from it, on the bankruptcy petition. At this stage, mistakes and omissions can be easily corrected. At a 341 meeting, on the other hand, such misinformation can be catastrophic.
Let's say, for example, that a debtor named Fred made $20,000 from the sale of his house. At the 341 meeting, Fred mentions that he sold the house, but he claims he made no money from the sale. The bankruptcy trustee will then investigate Fred's claim to make sure it's accurate.
Now, let's say the trustee finds out the truth — that Fred did, in fact, make $20,000 from the sale of his home. The trustee will then require an explanation of what happened to that $20,000. If Fred has an explanation, but no receipts or other documents to prove his explanation is true, the trustee will automatically move to deny Fred the bankruptcy, citing that he concealed property with the intent to defraud the court.
Remember, at the 341 meeting, you are under oath. If the court grants the trustee's motion to deny the bankruptcy, Fred will never be able to discharge his debts, and he will never be able to file for bankruptcy in the future, either. When it comes to filing for bankruptcy, make sure you are doing your very best to be accurate at all times. There is no fooling the bankruptcy trustee, and the repercussions of fraud are dire.
When debts are overwhelming, some people may wish they could just pick up and leave the country—and many do. Others acquire debt after leaving the country. A former client of mine recently called and expressed an interest in doing a Chapter 7 bankruptcy. She had resided in Maryland years ago but now lived in Nigeria. But unfortunately, in this day and age, it’s easy for creditors to pursue debtors all over the globe.
That’s why in 2007, the United States Bankruptcy Court for the District of Maryland ruled that U.S. citizens living abroad are free to file for U.S. Bankruptcy to discharge their debts. You can read the ruling here. As long as you are a U.S. citizen, even if you live abroad, you can file for bankruptcy in any state, including Maryland, in which you hold assets. That’s because your assets allow you to claim venue.
Unfortunately, my client no longer had any assets in the state. So, I advised her to open a checking account in Maryland and keep it active for 180 days prior to her bankruptcy filing. As long as she didn’t have assets in any other state, the 180-day-old checking account would be sufficient to establish Maryland as her bankruptcy venue.
Your best prospects for financial security may very well lie outside of Maryland. If you’ve already begun a bankruptcy claim, and you would like to move out of state, your bankruptcy case will remain active in Maryland. No matter where you live, you must make the trip back to Maryland for the 341 Meeting of Creditors. And for any move, in-state or out, let your attorney and bankruptcy trustee know your new address so they can update all your records with the court.
Every one of us has made poor financial choices at one time or another. But often times those choices are made under duress. Agreeing to a desperately needed medical procedure, purchasing groceries on credit, or trying to get a better job by taking expensive classes—these are decisions made when your back is against a wall. Medical bills can be jaw-dropping, groceries have to be purchased every week, and student loans never go away.
When you have to prioritize those debts over living expenses—like rent, utilities, and transportation—you can quickly end up in a vicious debt cycle. It doesn’t take long for a modest income to be completely spent before you’ve even covered the basics—no matter how careful you are. This is the domino effect.
Anyone with a calculator can see how easily a delicate budget can be blown. But how does debt impact people mentally?
Anxiety & Panic Attacks
Hiding your head in the sand is no way to deal with your problems. But staying up night after night won’t solve a financial crisis either. Controlling anxiety when it feels like your life is falling apart is easier said than done. Full-blown panic attacks can make it difficult to work, leading to even worse financial problems.
The shame that often accompanies debt and poverty can keep individuals from seeking support from friends and family. Worse yet, people in debt often don’t have money to participate in social activities like movies, dinner dates, or sports—driving them even further away from their community. This kind of isolation is itself a major contributor to depression.
Alcohol & Drugs
* The temptation to escape the extreme emotions that come with debt can be quite strong. Alcohol and drugs may seem to provide a much-needed break from the mental exhaustion of excessive debt. But establishing a pattern of self-medication will most likely create far more dire problems.
Deterioration of Relationships
The stress of financial debt can easily seep into personal relationships. Short tempers, nervousness, and an inability to focus can leave loved ones feeling cutoff. In the worst cases, debt can actually lead to the break-up of families.
Don’t think for a minute that the world, your employer, your friends, or your family is better off without you, for any reason. If you or someone you know is thinking about suicide, call 1-800-273-8255 right now. No matter how much money you owe, it will never come close to how much your life is worth.
If you're ready to take back control of your finances, call 301-589-4597 or email me at email@example.com to discuss your options. I offer free consultations to those enduring severe financial strain in Maryland and Washington D.C., including areas around Baltimore, Bethesda, Silver Spring, Gaithersburg, Rockville, Wheaton, Upper Marlboro, Bowie, College Park, Laurel, Frederick, Hagerstown, Hyattsville, Salisbury, Towson and Glen Burnie. Let me help you make a new start today.