The Bankruptcy Process for Maryland Individuals and Families

Understanding the bankruptcy process is crucial for individuals and families in Maryland who may be facing financial difficulties. This process offers a legal way to eliminate or reorganize debts, providing a fresh start for those struggling with overwhelming financial burdens.

The most common types of bankruptcy for individuals in Maryland are Chapter 7 and Chapter 13. Each type serves a different financial need and has distinct eligibility requirements.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy, often referred to as “liquidation bankruptcy,” allows individuals to discharge most of their unsecured debts, such as credit card bills and medical expenses. In Maryland, eligible individuals can keep certain exempt assets while eliminating the majority of their debts.

To qualify for Chapter 7 bankruptcy, individuals must pass the means test, which compares their income to the median income for Maryland households. If an individual's income is below the median, they typically qualify. However, if it’s above, they may need to file under Chapter 13 instead.

The Chapter 7 Process

The Chapter 7 bankruptcy process involves several key steps:

1. Credit Counseling: Before filing, individuals must complete a credit counseling session with an approved agency.
2. Filing the Petition: After counseling, you will file a petition with the bankruptcy court, including detailed information about your finances.
3. Automatic Stay: Once filed, an automatic stay goes into effect, preventing creditors from pursuing collection activities.
4. Meeting of Creditors: A meeting will be scheduled where creditors can ask questions about your finances.
5. Discharge of Debts: If no objections are raised, the court will grant a discharge, eliminating most unsecured debts within a few months.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy allows individuals to reorganize their debts and create a repayment plan to pay off creditors over three to five years. This type is ideal for those who have a regular income and want to retain their assets, such as a home or car.

To qualify for Chapter 13 in Maryland, individuals must have a stable income and their secured and unsecured debts must fall below specific limits set by the bankruptcy code.

The Chapter 13 Process

The Chapter 13 bankruptcy process typically involves the following steps:

1. Credit Counseling: Similar to Chapter 7, a credit counseling session is mandatory.
2. Filing the Petition: You will file your bankruptcy petition along with a repayment plan outlining how you intend to repay your debts.
3. Automatic Stay: An automatic stay comes into effect, protecting you from most collections.
4. Confirmation Hearing: A court hearing will be held where the judge will approve or deny your repayment plan.
5. Repayment Phase: After approval, you will make regular payments for the duration of the plan, usually three to five years.
6. Discharge: Upon successful completion of the repayment plan, remaining eligible debts will be discharged.

Considerations for Bankruptcy in Maryland

Before filing for bankruptcy, individuals and families in Maryland should consider other options such as debt consolidation or negotiation with creditors. It’s also advisable to seek the guidance of a qualified bankruptcy attorney who can provide valuable insights and help navigate the complex legal landscape.

Bankruptcy can have lasting impacts on an individual’s credit score, but it also offers a pathway to financial recovery. The fresh start that comes from discharging debts can enable families to rebuild their finances and regain stability.

In Maryland, navigating the bankruptcy process requires preparation and understanding. By familiarizing yourself with the steps involved in Chapter 7 and Chapter 13 bankruptcy, you can make informed decisions that align with your financial needs and goals.