Bankruptcy Law in Maryland: How to Handle Foreclosures

Bankruptcy law in Maryland can be a critical resource for individuals facing foreclosure. Understanding how these legal protections work can help homeowners navigate their financial difficulties and potentially save their properties.

In Maryland, foreclosure processes typically begin after a borrower fails to make mortgage payments. The lender will usually send notices and offer opportunities to rectify the situation before initiating foreclosure proceedings. However, if those actions fail, Bankruptcy can offer several options to help stop or delay foreclosure.

There are two main types of bankruptcy that individuals in Maryland can consider: Chapter 7 and Chapter 13.

Chapter 7 Bankruptcy:

Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, allows debtors to discharge most unsecured debts, including credit card debt and medical bills. However, it doesn’t typically allow homeowners to retain their homes unless they can afford to keep up with mortgage payments. If a home is not exempt under Maryland’s bankruptcy exemptions, it may be sold to pay creditors. This form of bankruptcy is ideal for those who have minimal income and substantial debts not secured by their home.

Chapter 13 Bankruptcy:

Chapter 13 bankruptcy is often more relevant for homeowners facing foreclosure. This type allows debtors to create a repayment plan to pay back a portion of their debts over three to five years. During this repayment period, the court will enforce an automatic stay, which halts foreclosure proceedings. Homeowners can catch up on missed mortgage payments while keeping their home. This option is particularly beneficial for those with a regular income who can manage a portion of their debts.

It’s crucial to note that filing for bankruptcy doesn’t automatically eliminate the mortgage debt. It can, however, provide a temporary relief and prevent the immediate loss of your home, giving you time to restructure your finances.

Additionally, Maryland has specific foreclosure laws that can affect proceedings. The state mandates a mediation process between borrowers and lenders. This process aims to find a solution before the foreclosure is finalized. Homeowners should take advantage of this opportunity to explore options such as loan modifications or forbearance agreements before resorting to bankruptcy.

In a bankruptcy filing, it’s essential to maintain accurate documentation of income, expenses, and debts. This information will play a critical role in your case and any repayment plan that may be established during bankruptcy. Seeking assistance from a knowledgeable bankruptcy attorney in Maryland can also significantly improve your chances of a favorable outcome, guiding you through the intricacies of the law and the processes involved.

In conclusion, if you find yourself facing foreclosure in Maryland, understanding bankruptcy law can be a vital step in protecting your home and managing your financial obligations. Whether you choose Chapter 7 or Chapter 13, being informed and seeking expert legal advice can make all the difference in securing your financial future.