Chapter 7 is often referred to as a 'straight' or 'liquidation' bankruptcy. The federal bankruptcy court appoints a 'trustee' to determine whether creditors will get paid. A common misperception by those contemplating bankruptcy is that they will lose everything they own if they file a bankruptcy. This bankruptcy myth is, however, not necessarily true.
In the state of Maryland, so long as the debtor has resided in the state for at least the last two years, the debtor is able to exempt a maximum of $11,000 of personal property.
Maryland law allows the debtor the ability to exempt:
Oftentimes, so long as the debtor's total property value is less than the exemption amounts listed above, the Trustee will not be able to seize any of the debtor's property and the debtor will receive a discharge of their debt so long as other 'New Law' requirements are met.
Prior to filing Chapter 7 Bankruptcy, the debtor must:
The last six months of paystubs or other income documentation is required because the Court looks to see if you qualify for Chapter 7 bankruptcy by analyzing your recent income history. The Baltimore bankruptcy attorneys at BWH will sit down with you and calculate what is called your 'current monthly income' ('CMI'). Once your CMI is calculated, the CMI is then annualized to see what your projected current annual income will be.
The next step is to determine whether or not your 'current annualized income' is greater than or less than the median income level for your household size in the county where you reside, for example:
If your annualized income is greater than the IRS median income level for debtor's household, then you may be forced to propose a 'Chapter 13 Plan of Reorganization' which allows you to repay a percentage of all the debts you owe over a 3-5 year period.
In other situations, the debtor may still be able to file in Chapter 7 bankruptcy, but in order to do so the debtor now must take the next step and complete the remainder of the means test. The means test is a long, complex, and rigorous calculation which takes into account the debtor's CMI and compares it to the IRS allowable deductions for the debtor's geographic locale. The purpose of the means test is to determine whether or not the debtor is able to pay any money back to his or her creditors through a Chapter 13 Plan.
The means test itself is a four page form that is used to supply all of the debtor's current annualized income information while deducting all of the applicable IRS allowable expense deductions. Once the means testing form is complete, a proposed plan payment amount is calculated. If the proposed plan payment amount is less than '$100' or negative, then the debtor qualifies for Chapter 7 bankruptcy.
Once the debtor has complied with the preliminary requirements outlined above, the debtor is ready to file the bankruptcy case. Our office files all cases electronically and in many instances can be filed the same day of your initial intake interview at our firm.
Once the case is filed, within one week the Court will send notice of when the 'Meeting of Creditors' is to be held. Although referred to as the Meeting of Creditors, in most instances creditors do not appear. This hearing usually takes place about thirty (30) days after the Debtor's bankruptcy petition is filed.
The debtor must bring with them a picture ID and a Social Security Card, or a W-2 health care card with Social Security number listed.
The Meeting of Creditors is simply an opportunity for the 'Trustee' to question the debtor and review the debtor's paperwork. The Trustee is looking to see whether or not the debtor qualifies to be a debtor under Chapter 7 Bankruptcy and whether or not the debtor has any assets which are not exempt that can be sold and the proceeds used to pay creditors a percentage of what is owed. This meeting typically takes about ten (10) minutes to conduct.
Once the meeting is concluded, if there are no outstanding issues, then the Trustee will recommend that the debtor receive a Discharge of their debt. As part of the new law, the Debtor must complete a Personal Financial Management class within 45 days of the first date set for the Meeting of Creditors. Once this class is completed a certificate is issued to the debtor certifying completion of the class. This certificate must then be given to the debtor's attorney so that it may be filed with the Court. If this certificate is not filed within 45 days of the Meeting of Creditors, then the debtor's bankruptcy case will be closed with no discharge being granted.
Certain debts cannot be eliminated in bankruptcy, including, but not limited to:
Although this is not an exhaustive list, you should ask your Baltimore bankruptcy lawyer at Belsky, Weinberg & Horowitz, LLC to learn how your bankruptcy will impact your ability to discharge your debts. We are here to answer your questions. If you are facing creditor harassment, foreclosure, or uncontrollable debt, there is hope.