Bankruptcy

There is Hope

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 road heading south. But 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 financial recovery.

The Option of Bankruptcy

Some people hesitate to claim bankruptcy to avoid its stigma. But when you are overwhelmed with debt, you have far more to gain than to 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 deal with life's inevitable complications. A successful bankruptcy claim will eliminate or consolidate your debt, allowing you to get a fresh financial start. So don't hesitate to exercise your legal rights!

Types of Bankruptcy

There are two types of bankruptcy 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.

A Chapter 13 bankruptcy can be a very effective tool for stopping a foreclosure and allowing you to restructure your payments if you own property. However, the court wants to guard against abusive repeat filers, so you are limited to no more than two Chapter 13 bankruptcies per year. And keep in mind that the second Chapter 13 bankruptcy you file will only provide thirty days of foreclosure protection from the automatic stay. After that thirty-day period, the mortgage bank may 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.

Benefits of Bankruptcy

Claiming bankruptcy in Maryland can stop creditor harassment, protect against foreclosures, wipe out credit card debt, discharge debt due to divorce, eliminate medical bill debt, consolidate alimony and child-support payments, prevent wage attachment, provide tax-debt relief, and allow you to rebuild your credit.

Renters Facing Eviction

Moving Out photo by John Benson

Avoiding Eviction

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). The stay will only stall the eviction for a month or two, but 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 situation, U.S.C. Title 11  still 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, however, the debtor cannot cure his/her arrears in that time frame, the automatic stay expires, and the landlord can proceed with the eviction. But even in that case, quickly filing for bankruptcy at least provides the debtor with time to plan for the eviction.

Homeowners Considering Bankruptcy

House and coins

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 $100,000 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. Therefore, it is very important to get an accurate valuation of your house to determine the amount of equity, if any, you have in it. This will help you make an informed decision about filing a Chapter 7 bankruptcy.

The Truth, The Whole Truth,
& Nothing but the Truth

Highway sign reading, 'Truth or Consequences'

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.

Getting a fresh start financially

If you're ready to take back control of your finances, call 301-589-4597 or email me at ds@dsteinlaw.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.