Bankruptcy Lawyers located in Germantown and Silver Spring, Montgomery County, Maryland

The bankruptcy process is governed by federal laws, so it works in a similar way in Maryland as it does in most states. Those filing for bankruptcy may see some of their debts erased or may be given the chance to repay the debts over the course of a few years through a payment plan. Once you file for bankruptcy, creditors are notified and ordered to cease all collection activities. The day you file the harassing calls from creditors come to a screeching halt! Any attempt by a creditor to contact is is a violation of federal law and is punishable.

Most people can maintain ownership of all of their personal property, including their homes and cars. Maryland has an extensive list of exemptions that protects your ownership of your home, your vehicles, some personal property, and other assets. Even more, you can retain ownership of all of your retirement pensions and deferred savings.  If you are considering filing for bankruptcy, an attorney can help you understand the process and make the right decisions, as there are many steps and important choices you may have to make to protect your assets while getting the most benefit out of the bankruptcy process.

There are two types of consumer bankruptcies. The simpler type, is Chapter 7, often referred to as a “fresh start”. Filing a successful Chapter7 bankruptcy will get rid of all of your unsecured debt and allow you to retain your secured debt, or get rid of the secured debt by surrendering the asset associated with the debt. The second type of bankruptcy is a Chapter 13. This is commonly referred to as a reorganization of debt. In a Chapter 13 you agree to enter into a repayment Plan. The Plan will require that you pay some or all of your unsecured debt. It will allow you to retain your assets that are secured, provided that you pay the associated debt.

To be eligible to file under Chapter 7 your disposable income must fall under certain thresholds, this is referred to as the “Means Test”.  If you pass the Means Test, then you qualify to file under Chapter 7. Whether Chapter 7 is the right choice for you depends on several factors. While Chapter 7s are quicker and cheaper, they do not allow you the opportunity to become current on secured debt that is past due. So if you are looking to save your house from foreclosure chances are Chapter 7 is not the right choice.

Those who do not qualify for Chapter 7 or do not wish to sell off their property to satisfy creditors may consider filing for Chapter 13. Chapter 13 is also referred to as reorganization bankruptcy and is designed to help the individual who is in debt to repay their debts over time using a payment plan while enabling that person to keep most of their property. The payment plan typically lasts for three to five years. A person wishing to file for Chapter 13 must have regular income and also meet the thresholds for how much secured and unsecured debt they can have.

The key difference is that while Chapter 7 and Chapter 13 bankruptcy both allow for the discharge of unsecured debts, a person filing for Chapter 7 may have his or her unsecured debts wiped out immediately after court approval (which may take a few months). In contrast, someone filing for Chapter 13 will likely need to continue making regular payments on the balances of any unsecured debts through their court-mandated payment plan, and debts are only discharged after all payments have been made. If you are not sure whether to file for Chapter 7 or Chapter 13, you may want to speak to a bankruptcy attorney to determine the best option for your specific situation.