Bankruptcy is a legal process that allows individuals to discharge some or nearly all of their unsecured debt. If you file for Chapter 7, the bankruptcy trustee will liquidate nonexempt assets in order to pay back creditors. In Chapter 13, you will be required to establish a repayment plan to repay a portion of the debt.
When you file for bankruptcy, the court issues an automatic stay, which halts all creditor repossession actions, including foreclosure and vehicle repossession.
If you file for Chapter 13, you are likely allowed to keep your home and car.
With Chapter 7, if you have equity up to the exemption limits, you may be able to keep your home and car as long as you maintain the payments.
Secured debt is debt that is backed by some type of collateral, such as a property or asset. An example of this would be a mortgage. Unsecured debt is not tied to any property and can be discharged through bankruptcy. Credit card debt and medical bills are examples of unsecured debt.
If you file for Chapter 7, you can get rid of most of your unsecured debt. In Chapter 13, you repay a portion of your debt during the time frame, after which the remaining debt can be discharged.
Certain debts, such as child support, alimony, and taxes may not be discharged.
When you file for bankruptcy, you will be required to attend a creditor meeting, which is conducted by the trustee. During the meeting, the trustee will review your paperwork and ask questions about your debt. You must bring the necessary documents, including tax returns, identification cards, and relevant financial statements. In most cases, creditors will not show up to this meeting.
If you are eligible for both Chapter 7 and Chapter 13, then you can choose either, although most prefer Chapter 7. To be eligible for Chapter 7, you must pass the means test. If your income is higher than the median income for your state, than you will not qualify for Chapter 7. This chapter is a good choice if you have relatively little assets and want a faster way to discharge nearly all of your debt.
If you have a steady income and substantial assets, you may benefit from filing for Chapter 13 instead.
You can always contact our Baltimore bankruptcy attorneys if you have any questions or need guidance for your bankruptcy.