How to Qualify for Bankruptcy in Maryland: Eligibility Requirements
Bankruptcy can provide a fresh start for individuals overwhelmed by debts. In Maryland, as in other states, there are specific eligibility requirements that individuals must meet to qualify for bankruptcy. Understanding these guidelines is crucial for anyone considering this legal remedy.
Types of Bankruptcy in Maryland
Maryland residents typically file either Chapter 7 or Chapter 13 bankruptcy. Each type has its own eligibility requirements:
1. Chapter 7 Bankruptcy Eligibility
Chapter 7 bankruptcy, also known as liquidation bankruptcy, involves the sale of non-exempt assets to repay creditors. To qualify for Chapter 7 in Maryland, individuals must pass the means test.
The means test compares a debtor’s average monthly income to the median income for a household of the same size in Maryland. If the average income is below this median, the debtor typically qualifies for Chapter 7. If it’s above, additional calculations involving allowable expenses are necessary to determine if they can still file.
2. Chapter 13 Bankruptcy Eligibility
Chapter 13 bankruptcy is a reorganization bankruptcy that allows individuals to create a repayment plan to pay back all or part of their debts over three to five years. To qualify for Chapter 13, individuals must have a regular source of income and meet specific debt limits. As of 2023, unsecured debts must be less than $465,275, and secured debts must be below $1,395,875. These amounts can change periodically, so it’s important to check for the most current figures.
Residency Requirement
To file for bankruptcy in Maryland, individuals must have been a resident of the state for at least the 180 days prior to filing. This residency requirement ensures that Maryland courts have jurisdiction over the case.
Credit Counseling Requirement
Before filing for bankruptcy, individuals are mandated to complete a credit counseling course from a government-approved agency within 180 days before filing. This course helps debtors understand their financial situation and explore alternatives to bankruptcy.
Documentation and Filing
Once individuals determine their eligibility, they must gather necessary documentation, including income statements, tax returns, debts, and assets. Filing for bankruptcy involves submitting a detailed petition and schedules that outline all financial information to the bankruptcy court.
Consideration of Exemptions
In Maryland, certain assets may be exempt from liquidation in a Chapter 7 bankruptcy. These can include a primary residence, a vehicle up to a certain value, and personal belongings. Understanding these exemptions is vital for protecting assets during bankruptcy proceedings.
Consult with a Bankruptcy Attorney
Given the complexity of bankruptcy laws and the potential implications on one’s financial future, consulting with a qualified bankruptcy attorney in Maryland is highly advisable. An attorney can provide tailored advice and guide individuals through the nuanced legal process.
In conclusion, qualifying for bankruptcy in Maryland involves meeting specific criteria dictated by the type of bankruptcy being pursued. By understanding the eligibility requirements, including income limits, residency duration, and the need for credit counseling, individuals can make informed decisions about their financial futures.