Anyone who has filed for consumer bankruptcy protection knows the great deal of pages of paperwork that must be completed before the filing.
There are several categories of papers:
In the series of discussions that will follow, we will discuss each form in greater detail and examine the intricacies of some of the issues presented when determining the appropriate answer to the questions being asked in the Statement of Financial Affairs, and the property and liability issues requiring disclosure in the Schedules. In the end, we hope you will gain a better understanding of the complexities of a bankruptcy filing and contact a qualified Baltimore bankruptcy lawyer for assistance if you are considering a bankruptcy.
This schedule discloses real property that you own. Real property is considered to be items such as homes, condominiums, land, buildings, time shares, and so on. In any bankruptcy case, all of your real property must be disclosed in Schedule A, regardless of whether or not the real property is your place of residence, an investment property, or belongs to someone else but you are just listed on the deed for inheritance purposes. So long as your name is listed on the deed or on title to the real property, you have a legal ownership interest in the real property and are required to disclose it.
Schedule A generally includes a column for a description of the real property such as, its address, whether it is a single family home, town home, or duplex, a separate column regarding the real property’s estimated fair market value, and a column disclosing the total amount of any secured claims or mortgage balances secured against the real property. All real property you have an interest in must be listed on Schedule A regardless of your intentions of keeping the property or not.
Even if your name is not on title to the real property, but you have an equitable interest in the real property, you are required to disclose that asset. An equitable interest may arise in real property, if for example, a person has passed and has left you their home, even though you are not yet listed on the deed. Another example would be during the course of a divorce proceeding you are awarded your spouse’s home and your name has still not been listed on the deed to the home. There are other events that could create an equitable interest in real property requiring you to disclose that asset. To learn more be sure to consult with your attorney to see whether or not an item requires disclosure.
Schedule B deals with all of your personal property. This schedule will deal with anything from the clothes on your back to the vehicle in your garage.
Schedule B has a complete categorization of all personal property such as:
Schedule B provides a column for a description of the type or amount of property you hold within one of the specifically numbered 35 categories. Schedule B also provides a column for the value of whatever personal property you own. Personal property can include anything that is in your name that is not real property, or anything else in which you may hold an interest.
Unsure where to list your life insurance policy? Look no further, Schedule B is your answer! The Bankruptcy Code requires full disclosure of all of your personal property. Failure to disclose all of your assets may lead to charges for bankruptcy fraud!
Now that we have discussed where to list all of your assets, lets talk about how they are treated in your bankruptcy case. In order not to lose assets by way of a trustee seizure in a Bankruptcy case, you must be sure that the assets are exempt under appropriate exemption law. Originally, the Bankruptcy Code allowed for exemptions to be applied to the value of any assets you desired to retain, however, the individual States were later allowed to "opt-out" of the Federal Exemption scheme and substitute their own set of exemptions for its own State residents.
Some States' exemption statutes are more generous than the Federal Exemptions, but Maryland's Exemptions are actually a little less favorable. If you have been a resident of the State of Maryland for at least two years just prior to the filing of your bankruptcy case, then you must apply Maryland Exemption law. If you did not live in the State of Maryland for the 2 years prior to the filing of your bankruptcy case, then you may either have to apply your prior residence State's Exemptions or the Federal Exemption Statute, you should consult an attorney to be sure which to choose.
In this State a debtor is allowed to exempt no more than $12,000 worth of personal property including equity in cars and other personal property, is also entitled to a homestead exemption to exempt equity in a principal residence in the amount of $22,975.00, and you are also allowed to exempt a total of $5,000 for tools used in work or profession.
Now, you may be getting nervous to file bankruptcy because you have been saving for retirement in a 401 k or IRA. Don't be nervous, as these monies are usually 100% exempt allowing you to still have the funds available for your retirement, so long as they are qualified retirement plans recognized by the Internal Revenue Service: 401 k's, 403 b's, 457 a's, SEP IRA's, Simple IRA's. These qualified retirement accounts have their own exemption, and there is no limit to that exemption. To be sure your retirement asset is exempt, consult an attorney.
The same thing applies to life insurance. Remember whole life policies will generally have a cash surrender value, and that amount can only be protected with the remaining $11,000.00 of real and personal property exemptions allowed to you under Maryland law. Term life insurance policies typically have no cash value, but nonetheless would be exempt under Maryland law as money payable in the event of accident, sickness, or death.
Also, claims for personal injury or Worker's Compensation Claims are usually exempt as money payable in the event of accident, sickness, or death, but any lost wage component of those claims would have to be exempt under the real or personal property exemption statutes under Maryland Law. Applying exemptions is very complicated; consult an attorney before you end up losing your property!
Schedule D discloses any and all creditors that retain liens against any of your real or personal property. These types of creditors are typically referred to as “secured creditors”. Common examples of secured creditors include mortgage companies, car loan companies, financing companies, and other banking type institutions that may lend you money and retain a lien against whatever property being purchased by you with the money lent. Secured creditors also include creditors that have been able to obtain a judgment against you and have attached that judgment as a lien against your property. Other creditors that may become secured creditors pursuant to Federal or State law also include homeowner’s associations, municipal billing authorities for items such as water bills, property taxes, or for other municipal charges that then become secured against real property owned by you. Federal and State income taxes, trust fund taxes, or any other type of tax owed by you may also become a secured debt against your property.
Schedule D is designed so that the left hand column lists the name and address of the secured creditor, the next column to the right describes who is liable for the debt and whether the secured debt is unliquidated, disputed, or contingent, the next column then describes the property which secures the debt, such as a car or a home. The following two columns list the total amount owed on the secured debt and whether any of the total amount owed is unsecured (meaning that the secured creditor is owed more than what the property securing the debt is worth). There are other events that could create a secured debt in real or personal property requiring you to disclose that secured creditor, be sure to ask your bankruptcy attorney.
Schedule E discloses a complete list of any claims that are entitled to priority status. Priority debt is an example of a type of debt that will not typically be discharged through a bankruptcy filing. The most common priority debts are tax debts owed to the Internal Revenue Service or the State of Maryland. Another common example of priority debt is domestic support obligations (child support, alimony, etc.).
Schedule E, like Schedule D, is also designed so that the left hand column lists the name and address of the priority creditor, the next column to the right describes who is liable for the debt and whether the debt is unliquidated, disputed, or contingent. The next column to the right describes the type of priority, such as unpaid tax priority or unpaid child support. The following two columns list the total amount owed on the priority debt and whether any of the total amount owed is not entitled to priority.
Priority claims are broken down by type. The different types of priority debt are domestic support obligations, extensions of credit in an involuntary case, wages, salaries, and commissions, contributions to employee benefit plans, certain claims held by farmers and fishermen, deposits by individuals, taxes and certain other debts owed to governmental units, commitments to maintain the capital of an insured depository institution, and claims for death or personal injury while debtor was intoxicated. Knowing whether a creditor has a priority claim or not can be tricky, and is best left to the professionals.
Schedule F is where all unsecured creditors are disclosed. Unsecured creditors are any creditor that has no security interest in any property of the debtor and is not entitled to priority status as Schedule E creditors. The most common unsecured debt types are credit cards. Other types include personal loans, hospital bills, doctor bills, and deficiency balances owed on foreclosed homes or repossessed cars.
In Schedule F you will state the name of the creditor, the mailing address including zip code, and the last four digits of any account number associated with that creditor. This information will be disclosed in the left column. The next column to the right describes who is liable for the debt and whether the debt is unliquidated, disputed, or contingent.
The next column then describes the type of unsecured debt it is, such as credit card, personal loan, deficiency balances, or any other classification the debt may have.
The last column lists the total amount owed to the specific creditor.
Schedule F is also where all student loans and unpaid parking tickets will be disclosed. Remember, all outstanding debt owed by the Debtor must be disclosed in a bankruptcy, even if the bankruptcy will not discharge the debt. A perfect example of this would be student loans, which unfortunately are not dischargeable in a bankruptcy.
Schedule G discloses all executory contracts and unexpired leases to which you may be a party. In this Schedule you must disclose any and all unexpired leases of real or personal property or other type of agreements, such as realtor agency agreements, royalty or commission agreements, car leases, apartment rental leases etc., to which you are an obligated party. The disclosure requires the names and complete mailing addresses of all parties associated with the lease or contract described.
In the left hand column you will list the name and mailing address of all parties associated to the agreement, contract or lease.
In the right hand column, you will list a description of the lease or contract, the nature of your interest in the lease or contract, and whether or not you wish to assume or reject any particular agreement or lease. Remember, Bankruptcy law requires full disclosure.
Schedule H discloses all co-signors with whom you may owe a certain debt. It is very important that you list all of your co-signors. If you fail to do so, you may leave the door open for that co-signor to pursue you for what’s called a right of contribution. Basically, when a person files bankruptcy, that person’s filing does not eliminate the obligation of any co-signor upon any of the debt that exists between the person filing bankruptcy and that co-signor. If the co-signor subsequently pays on a debt co-signed with you, then that co-signor can sue you for half of the payments paid by the co-signor. It is very important to disclose a bankruptcy case you are filing to any and all co-signors that may exist. Remember, Bankruptcy law requires full disclosure. Any omission could impact your ability to receive a fresh start.
Schedule I is where you will disclose all of your monthly income. In the top box you will list your marital status, and list any dependents and their ages. To protect the identities of all minors, no names are listed on petitions, just their sex and age. It is important to disclose all of your income on schedule I, including but not limited to employment wages, social security income, disability income, self-employment income, rental income, royalties, annuities, financial investment income streams of any nature, etc.
In a bankruptcy, it is important to disclose all of your income so the Trustee can determine what percentage of debt you will be able to afford to pay back or that in fact you cannot afford to pay any of your creditors back. Remember that you will also have to provide all of your income statements to the Trustee. Specifically, all income that has been received by you within the last 6 months must be disclosed. If during the course of your bankruptcy case your income increases by at least 10%, then you will be required to disclose that additional income to the Court and your Trustee.
Now that all of your monthly income is listed in Schedule I, it is time to start Schedule J, disclosing all of your monthly expenses. This is the Schedule that will put down on paper where all of your hard earned money is going each month. The main purpose of filing for Bankruptcy is to help you get back on your feet, and out of debt, so in writing your budget, it is important to keep that in mind at all times.
In your pre-bankruptcy lifestyle, you may have splurged on entertainment expenses, but remember, now you eliminating all or some of your debt, and it is important to take a step back, and see where frivolous spending can be cut. Some of your expenses are set in stone, like your rent or mortgage payments, car payment, car insurance, life insurance, health insurance, etc., you will want to have to list the amount of these expenses. When looking to see if someone is abusing the process of bankruptcy, your expense schedule will be scrutinized to locate any luxury spending or significant diversions of income towards one’s retirement plan.
This Statement is typically an 18 question form that asks many questions, for example, your yearly income for the last 3 years, your prior addresses, prior names, pending lawsuits, pending garnishments, past repossessions, past foreclosure, past gifts, past transfers, past closed bank accounts, fees paid for bankruptcy filing, and so on.
If you are self-employed, run your own business, or own an interest in a corporation, LLC or other type of company, then another 7 questions are asked regarding the name and location of your business, if it is incorporated or a sole proprietorship, the accountant’s identity &location, inventory value, current partners or officers, past partners or officers, percentage share of ownership, environmental information, pension information, tax ID number, etc. This form attempts to give a broad picture as to your financial situation which is then further supported by the schedules.
If you have additional concerns about bankruptcy paperwork, don’t hesitate to consult our Baltimore bankruptcy lawyers.