Bankruptcy in Maryland: How to File for Debt Relief

Bankruptcy can be an essential tool for individuals facing overwhelming debt in Maryland. Understanding the process and requirements is vital for anyone considering this option to achieve debt relief.

In Maryland, there are two primary types of bankruptcy filings for individuals: Chapter 7 and Chapter 13. Each has distinct eligibility criteria and implications, making it crucial to choose the one that aligns with your financial situation.

Chapter 7 Bankruptcy

Chapter 7, often referred to as "liquidation bankruptcy," is designed for individuals with limited income and significant unsecured debts such as credit cards and medical bills. When you file for Chapter 7, a court-appointed trustee sells non-exempt assets to repay creditors. However, many filers can keep their essential property due to exemptions that protect certain assets.

To qualify for Chapter 7 in Maryland, you must pass the means test, which compares your income to the state median. If your income is below the median, you may qualify for Chapter 7 bankruptcy. If it exceeds the median, you will likely need to consider Chapter 13.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy is a reorganization plan allowing individuals to keep their assets while repaying debts over three to five years. This option is suitable for those with a regular income who want to avoid foreclosure or repossession. Under Chapter 13, you propose a repayment plan to your creditors, which the court must approve.

Eligibility for Chapter 13 is not based on income alone but requires a stable source of income to maintain regular payments. Additionally, you must have unsecured debts of less than $419,275 and secured debts of less than $1,257,850 (as of 2023). These limits are subject to change, so it's essential to check for any updates before filing.

Steps to File for Bankruptcy in Maryland

Filing for bankruptcy involves several critical steps:

1. Credit Counseling: Before filing, you must complete a credit counseling course from an approved provider. This course must be completed within 180 days before filing for bankruptcy.
2. Gathering Documents: Collect all necessary financial documents, including income statements, tax returns, debts, and asset documentation.
3. Filing the Petition: File your bankruptcy petition with the U.S. Bankruptcy Court in Maryland. This includes filing the necessary schedules detailing your assets, liabilities, income, and expenses.
4. Meeting of Creditors: Attend the creditors' meeting (Section 341 meeting) where you will answer questions about your financial situation.
5. Completion of Financial Management Course: After filing, complete a debtor education course before your debts can be discharged.

Impact of Bankruptcy on Your Credit

One of the significant repercussions of filing for bankruptcy is its impact on your credit score. Chapter 7 bankruptcy remains on your credit report for ten years, while Chapter 13 remains for seven years. However, many individuals find that the relief from debt allows them to rebuild their credit more effectively after bankruptcy.

It’s essential to manage your finances prudently post-bankruptcy by developing a budget, paying bills on time, and monitoring your credit report regularly.

Consulting with a Bankruptcy Attorney

Seeking legal advice from a knowledgeable bankruptcy attorney is vital. An attorney can help you navigate the complexities of bankruptcy law, ensure that your paperwork is filled out correctly, and provide guidance tailored to your specific financial circumstances.

In conclusion, filing for bankruptcy in Maryland can be a practical solution for struggling individuals seeking debt relief. Understanding the differences between Chapter 7 and Chapter 13, following the filing steps, and consulting a legal expert are critical to moving forward successfully.