If you are contemplating bankruptcy in Pasadena, MD then you need a good attorney. David Ruben and the attorneys at the Maryland Bankruptcy Center take the time to listen, understand your case, and act in your best interests.
WHAT IS THE MARYLAND BANKRUPTCY CENTER AND WHAT CAN WE DO FOR YOU?
The Maryland Bankruptcy Center is a full service bankruptcy law firm that will help you eliminate your debt in a professional, convenient and courteous manner every step of the way. We are experienced bankruptcy attorneys whose sole job it is to help you get back on your feet so you can get on with your life. Mr. Ruben has earned Martindale-Hubbell’s AV rating, which is the highest rating bestowed on attorneys for their professional knowledge and ability as well as ethical standards in the practice of law. Click on our Who We Are page to learn more about us. If you are in Pasadena or anywhere else in Maryland, we have a location convenient to you.
WHY CHOOSE US?
Client’s choose the Maryland Bankruptcy Center because IMMEDIATE CUSTOMER SERVICE is our primary objective. Our fees are affordable and we offer payment plans in all cases. We have many convenient locations all over Maryland. CONTACT US now and you will receive a telephone call or an e-mail back from us almost immediately. We are available by phone or by computer 24 hours a day, 7 days a week, and our hard work and convenience doesn’t stop once you hire us. We will begin working on your case immediately. The harassing telephone calls at home and work wills stop immediately. You will be represented in court by an experienced lawyer, and we will continue to work with you until your case is finished.
Chapter 7 Bankruptcy
Chapter 7 is the section of the Bankruptcy Code that allows for the liquidation of assets to satisfy one’s debts. However, it is extremely rare that an individual consumer’s assets or belongings are actually sold. Once your Chapter 7 bankruptcy proceedings are complete, most of your debts are discharged, and you no longer owe your creditors money for those debts.
However, a Chapter 7 bankruptcy, which is preferable to a Chapter 13 bankruptcy for an individual consumer, if only because there is no repayment plan associated with the proceedings, does not apply to everyone. If you own a home, the bankruptcy Trustee will want to know how much equity there is in your home, or if you are behind on your mortgage payments. Also, there is a limit in terms of household income in order to qualify for a Chapter 7 bankruptcy (see below). In some instances, filing a Chapter 13 bankruptcy may the only possible bankruptcy alternative. Because every situation is different, it is important that you consult with a Maryland Bankruptcy Attorney to discuss your individual circumstances before making the decision to file for Chapter 7 bankruptcy.
Who Should File for Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is commonly filed in situations in which an individual owes a large amount of debt, does not own a home and has few non-exempt assets. Examples of circumstances where Chapter 7 bankruptcy may be appropriate include instances where:
You owe a large amount of credit card debt and medical bills that cannot be repaid within a reasonable period of time
- You earn just enough income to cover living expenses, with no money left to pay off any outstanding debts
- You do not have a home, vehicles or large amounts of cash or personal assets
- You have a home or vehicle but there is little or no equity in that home or vehicle after you take your exemption entitlement
Who is Eligible for Chapter 7 Bankruptcy?
Individuals, partnerships, sole proprietorships and corporations are all eligible to file for Chapter 7 bankruptcy protection. However, this form of bankruptcy is most commonly filed by individuals.
To be eligible for Chapter 7 bankruptcy, you must meet the following requirements as a minimum:
- You must have your residence, domicile or place of business in the state where you file
- You must have had no prior bankruptcy filing dismissed for cause within the past 180 days
- You must have had no prior discharge under Chapter 7 bankruptcy within the past eight years
Additionally, for an individual to be eligible for Chapter 7 bankruptcy, he or she must pass the “Means Test,” one of the new bankruptcy rules passed in 2005. This test first determines whether a debtor’s average monthly income is at or less than the median family income for a family of comparable size in your state for the six month period prior to filing for bankruptcy. If your income meets this requirement, then you may be eligible to file for Chapter 7 bankruptcy, depending on other factors.
If, however, your household income exceeds the relevant median family income, a more complicated analysis must be performed to determine eligibility. This analysis involves incorporating living expenses to determine whether the debtor’s income is low enough to qualify for Chapter 7 bankruptcy. If a particular debtor does not qualify for Chapter 7 bankruptcy under the means test, he or she may still file for bankruptcy under Chapter 13 of the Bankruptcy Code.
How Does Chapter 7 Bankruptcy Work?
Filing the Chapter 7 Bankruptcy Petition
The Chapter 7 bankruptcy case begins with the filing of a petition with the bankruptcy court. This petition must be filed in the jurisdiction where you have resided for the greater part of the past 180 days. The petition must include a list of all creditors and the amount due to each creditor. In addition to the petition itself, Chapter 7 debtors must also provide the following to the Bankruptcy Court:
- Schedule of assets and liabilities
- Statement of financial affairs
- Schedule of income and expenditures
- Schedule of executory contracts and unexpired leases
- Schedule of exempt property
Debt Counseling and Additional Requirements in Consumer Bankruptcy Cases
Consumer debtors (as opposed to business debtors) have additional filing requirements. Under the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), consumers facing Chapter 7 bankruptcy must pass a one-session credit counseling program in order to qualify for filing for bankruptcy.
Counsel for the Debtor must then file a certificate of completion for the credit counseling with the Bankruptcy Court. Consumer debtors must also file the following documents with the Court:
- Evidence of income from employers
- Results of the “means test” as stated above
- Affidavits of compliance with local rules
While the bankruptcy case is pending, you must also complete an approved financial management course, which must also be filed with the Court in order to get your Final Discharge.
Automatic Stay
Automatic stay is the legal term for the cessation of debt collection actions against a debtor during a bankruptcy. This stay is what will end all of those awful, relentless and harassing collection calls you might now be receiving. Also, during this period, creditors may not initiate or continue lawsuits against you, or garnish your wages. Automatic stay arises as soon as the bankruptcy petition is filed. While automatic stay does not apply to all actions, it generally arises in most situations.
Providing Notice to the Relevant Creditors
Once the bankruptcy petition is filed, notice must be given to all creditors listed in the bankruptcy petition. Twenty to forty days after the petition for bankruptcy is filed, a meeting of the creditors must be held, during which time you and your attorney will meet with a Court-appointed trustee. You will be asked questions about your income, assets and liabilities, as listed in your petition. Unsecured creditors have 60 days after the meeting of the creditors to file their claims with the court, should they choose to do so. In a Chapter 7 bankruptcy filing, most creditors do not file a claim.
Appointing a Trustee
Immediately after the bankruptcy petition is filed, the Bankruptcy Court appoints a trustee to oversee the case determine if there are any non-exempt assets. The trustee has a duty to sell the debtor’s non-exempt property at fair market value in order to maximize the amount repaid to the creditors, or, in the alternative, to request an equal sum of money from the debtor. The trustee also has the ability to set aside preferential payments made to creditors within 90 days prior to filing for bankruptcy and to disregard any security interests that were not perfected under state law. If the debtor has no assets to liquidate, the trustee files a “no asset” report with the Bankruptcy Court, requesting that any the debtor’s unsecured debts be forgiven.
The Discharge of Debt
After the trustee liquidates all non-exempt assets, or makes an arrangement with the debtor for an equal sum of money (or files a “no asset” report with the court), the trustee distributes the sale proceeds to the creditors, if there has been a liquidation of any assets. Each creditor is placed into a class of claims under § 726 of the Bankruptcy Code. Essentially, each class of creditors must be paid in full before the next class is paid.
Creditors have 60 days following the creditors meeting to challenge the debtor’s right to discharge of that creditor’s particular debt. But do not be overly concerned. As your bankruptcy attorney will advise you, there are very specific and limited circumstances under which an unsecured creditor can challenge a discharge of the debt owed to them. If a particular creditor does challenge your right to a discharge, that creditor will file what is called an adversary proceeding, and the court will make a determination as to whether or not that debt is entitled to be discharged. If no such challenges are made, your obligations are discharged approximately four months after the bankruptcy petition was filed.
What Debts are Not Dischargeable through Chapter 7 Bankruptcy?
Most debts are dischargeable in bankruptcy. However, certain debts are not dischargeable in Chapter 7 bankruptcy. These debts typically include:
- Secured debts
- Student loans
- Most federal, state and local tax deficiencies
- Government fines and penalties
- Criminal restitution
- Alimony and child support payments
If Chapter 7 Bankruptcy is the Right Option for Me, When Should I File for Bankruptcy Protection?
If you and your attorney determine that Chapter 7 bankruptcy is the best option for you, it is important that you file your case in a timely fashion. As mentioned above, an automatic stay arises once you file a petition for bankruptcy. This protects you from foreclosure, the garnishment of your wages, repossession or any other collection activities during the bankruptcy proceedings. Filing for bankruptcy will allow you time to breathe while the bankruptcy trustee communicates with your creditors.
Bankruptcy terms can be difficult to understand. Below are brief definitions of the terms used in this site and in the Bankruptcy Code. If you have any questions, please feel free to contact us. 410-766-4044.
Adequate protection:Payment to a secured creditor to protect the value of the creditor’s lien during the bankruptcy proceeding from loss due to depreciation or non payment of a senior lien.
Adversary proceeding: A lawsuit filed in the bankruptcy court which is related to the debtor’s bankruptcy case. Examples are complaints to determine the dischargeability of a debt and complaints to determine the extent and validity of liens.
Assets:Assets are every form of property that the debtor owns. They include such intangible things as business goodwill; the right to sue someone; or stock options. The debtor must disclose all of his assets in the bankruptcy schedules; exemptions remove the exempt assets from property of the estate.
Automatic stay: The injunction issued automatically upon the filing of a bankruptcy case which prohibits collection actions against the debtor, the debtor’s property or the property of the estate. See Relief from Stay on terminating the injunction.
Avoidance: The Bankruptcy Code permits the debtor to eliminate (avoid) some kinds of liens that interfere with (or impair) an exemptions claimed in the bankruptcy. Most judgment liens that have attached to the debtor’s home can be avoided if the total of the liens (mortgages, judgment liens and statutory liens) is greater than the value of the property in which the exemption is claimed. This is sometimes called “lien stripping.” For more, see Lien Avoidance and Lien Stripping.
Avoidance powers: Rights given to the bankruptcy trustee (or the debtor in possession in a Chapter 11) to recover certain transfers of property such as preferences or fraudulent transfers or to void liens created before the commencement of a bankruptcy case.
B22a: Is the Means Test Form
Bankruptcy Code. Title 11 of the United States Code governs bankruptcy proceedings. Bankruptcy is a matter of federal law and is, with the exception of exemptions, the same in every state. When federal bankruptcy law conflicts with state law, federal law controls.
Bankruptcy Code 11 U.S.C. 523: Prohibits the discharge of debts that were obtained by fraud.
Bankruptcy estate: The estate is all of the legal and equitable interests of the debtor as of the commencement of the case. From the estate, an individual debtor can claim certain property exempt; the balance of the estate is liquidated in a Chapter 7 to pay the administrative costs of the proceeding and the claims of creditors according to their priority.
Chapter 7: The most common form of bankruptcy, a Chapter 7 case is a liquidation proceeding, available to individuals, married couples, partnerships and corporations.
Chapter 11: A reorganization proceeding in which the debtor may continue in business or in possession of its property as a fiduciary. A confirmed Chapter 11 plan provides for the manner in which the claims of creditors will be paid in whole or in part by the debtor.
Chapter 12: A simplified reorganization plan for family farmers whose debts fall within certain limits.
Confirmed: A plan of reorganization in Chapter 11, 12 or 13 approved by the court and binding on the parties is said to be confirmed.
Chapter 13: A repayment plan for individuals with debts falling below statutory levels which provides for repayment of some or all of the debts out of future income over 3 to 5 years. See The Power of 13.
Charged Off: This is an accounting term that means the creditor does not expect to collect on the debt. It relates to the creditor’s taxes. It starts time periods under the Fair Credit Reporting Act. It does not mean that the debt is no longer legally enforceable.
Collateral: The property which is subject to a lien. A creditor with rights in collateral is a secured creditor and has additional protections in the Bankruptcy Code for the claim secured by collateral. The measure of the secured claim is the value of the collateral available to secure the claim: it is possible to have a lien on property that is subject to a senior lien or liens such that the security available to pay the claim is really without value to the junior creditor. The general rule with respect to liens is “First in time, first in right.” More on Secured Debts.
Confirmation: The court order which makes the terms of the plan for repayment of debts in a Chapter 11, 12 or 13 binding. The terms of the confirmed plan replace the pre-petition rights of the debtor and creditor.
Consumer Debt: Debts incurred by an individual for personal, family or household purposes. Taxes are not consumer debts; neither are business loans. The means test only applies to those with primarily consumer debt.
Contingent: Used to describe debts that are not fixed in right at the time, but are dependent on some other event happening to fix the liability.
Conversion: Cases under the Code may be converted from one chapter to another chapter; for example, a Chapter 7 case may be converted to a case under Chapter 13 if the debtor is eligible for Chapter 13. Even though the chapter of the Code which governs it changes, it remains the same case as originally filed.
Creditor: The person or organization to whom the debtor owes money or has some other form of legal obligation.
Debtor: The debtor is the entity ( person, partnership or corporation) who is liable for debts, and who is the subject of a bankruptcy case.
Debt Relief:Debt relief is the partial or total forgiveness of debt, or the slowing or stopping of debt growth, owed by individuals, corporations, or nations.
Debtor in Possession: In a Chapter 11 case, the debtor usually remains in possession of its assets and assumes the duties of a trustee. The debtor in possession is a fiduciary for the creditors of the estate, and owes them the highest duty of care and loyalty.
Denial of discharge: Penalty for debtor misconduct with respect to the bankruptcy case or creditors as a whole. The grounds on which the debtor’s discharge may be denied are found in 11 U.S.C. 727. When the debtor’s discharge is denied, the debts that could have been discharged in that case cannot be discharged in any subsequent bankruptcy. The administration of the case, the liquidation of assets and the recovery of avoidable transfers, continues for the benefit of creditors.
Discharge: The legal elimination of debt through a bankruptcy case. When a debt is discharged, it is no longer legally enforceable against the debtor, though any lien which secures the debt may survive the bankruptcy case.
Dischargeable: Debts that can be eliminated in bankruptcy. Certain debts are not dischargeable; that it, they may not be discharged through bankruptcy or may only be discharged through Chapter 13. Family support and criminal restitution are examples of debts which cannot be discharged. Debts incurred by fraud can only be discharged in Chapter 13.
Dismissal: The termination of the case without either the entry of a discharge or a denial of discharge; after a case is dismissed, the debtor and the creditors have the same rights as they had before the bankruptcy case was commenced. Dismissal is the penalty for many essentially minor infractions of bankruptcy procedures under the 2005 amendments.
Domestic Support Obligation: Debts for alimony, maintenance or support owed to child, spouse or governmental entity that paid for the support of the child or spouse. A new term introduced by the bankruptcy amendments of ‘05.
Exempt: Property that is exempt is removed from the bankruptcy estate and is not available to pay the claims of creditors. The debtor selects the property to be exempted from the statutory lists of exemptions available under the law of his state. The debtor gets to keep exempt property for use in making a fresh start after bankruptcy.
Exemptions: Exemptions are the lists of the kinds and values of property that is legally beyond the reach of creditors or the bankruptcy trustee. The debtor in bankruptcy keeps the exempt property. What property may be exempted is determined by state and federal statutes, and varies from state to state.
Fiduciary: one who is entrusted with duties on behalf of another. The law requires the highest level of good faith, loyalty and diligence of a fiduciary, higher than the common duty of care that we all owe one another. The debtor in possession in a Chapter 11 is a fiduciary for the creditors, owing loyalty to the creditors and not the shareholders of the debtor.
General Unsecured Claim: Creditor’s claim without a priority for payment for which the creditor holds no security (or collateral). If the available funds in the estate extend to payment of unsecured claims, the claims are paid in proportion to the size of the claim relative to the total of claims in the class of unsecured claims.
Indemnify: to guarantee against any loss which another might suffer. In bankruptcy, it is used to describe the undertaking of one spouse in a divorce to assume certain debts of the marriage and to see that the other spouse is not forced to pay. Also called a “hold hamrless” clause.
Lien: An interest in real or personal property which secures a debt; the lien may be voluntary, such as a mortgage in real property, or involuntary, such as a judgment lien or tax lien.
Lien Avoidance: In bankruptcy the debtor, by way of a Motion to Avoid Lien, can avoid certain liens that attached to the debtor’s exempt property prior to the filing of the bankruptcy petition.
Lien Stripping: Lien stripping refers to the splitting a mortgagee’s secured claim into secured and unsecured components and reducing the claim to the market value of the debtor’s residence, thereby allowing the debtor to modify the terms of the mortgage and reduce the amount of the debt.
Liquidated: A debt that is for a known number of dollars is liquidated. An unliquidated debt is one where the debtor has liability, but the exact monetary measure of that liability is unknown. Tort claims are usually unliquidated until a trial fixes the amount of the liability of the tort feasor.
Means Test: Added to the Code in 2005, the means test is intented to screen out those filing Chapter 7 who are supposedly able to repay some part of their debts. The test is found in Official Form B22a. Debtors who fail the means test may convert their case to another chapter of bankruptcy.
Meeting of creditors:The debtor must appear at a meeting with the trustee to be examined under oath about assets and liabilities. Creditors are invited but seldom attend. The meeting is sometimes called the 341 meeting, after the section of the Bankruptcy Code that requires it.
Non dischargeable: A debt that cannot be eliminated in bankruptcy. Non dischargeable debts remain legally enforceable despite the bankruptcy discharge. The Code’s list of non dischargeable debts is found at 11 U.S.C. 523. The scope of the discharge in Chapter 13 differs from the discharge in Chapter 7.
Perfection: When a secured creditor has taken the required steps to perfect his lien, the lien is senior to any liens that arise after perfection. A mortgage is perfected by recording it with the county recorder; a lien in personal property is perfected by filing a financing statement with the secretary of state. An unperfected lien is valid between the debtor and the secured creditor, but may be behind liens created later in time, but perfected earlier than the lien in question. An unperfected lien can be avoided by the trustee.
Personal property: Assets, such as cars, stock, furniture, etc., that is not real estate or affixed to real property,
Petition: The document that initiates a bankruptcy case. The filing of the petition constitutes an order for relief and institutes the automatic stay. Events are frequently described as “pre-petition”, happening before the bankruptcy petition was filed, and “post petition”, after the bankruptcy was initiated.
Power of 13: In Chapter 13, the debtor can impose a debt management plan on creditors, which creditors must accept, stopping the running of interest on credit card debt. The court will enforce the plan against uncooperative creditors. The discharge in Chapter 13 covers many debts that cannot be discharged in Chapter 7. It is a powerful tool for debtors to regain control of their financial lives and to get a meaningful fresh start.
Preference: A transfer to a creditor in payment of an existing debt made within certain time periods before the commencement of the case. Preferences may be recovered by the trustee for the benefit of all creditors of the estate.
Pre-petition: Claims or events arising before the commencement of the bankruptcy case, that is, before the filing of the bankruptcy petition. Generally only pre petition debts may be discharged in a bankruptcy proceeding.
Priority: The Bankruptcy Code establishes the order in which claims are paid from the bankruptcy estate. All claims in a higher priority must be paid in full before claims with a lower priority receive anything. All claims with the same priority share pro rata. Claims are paid in this order: 1) costs of administration 2) priority claims and 3) general unsecured claims. Secured claims are paid from the proceeds of liquidating the collateral which secured the claim.
Priority claims: Certain debts, such as unpaid wages, spousal or child support, and taxes are elevated in the payment hierarchy under the Code. Priority claims must be paid in full before general unsecured claims are paid.
Proof of claim: The form filed with the court establishing the creditor’s claim against the debtor.
Property of the estate: The property that is not exempt and belongs to the bankruptcy estate. Property of the estate is usually sold by the trustee and the claims of creditors paid from the proceeds.
Reaffirm: The debtor can chose to waive the discharge as to a debt that is reaffirmed. Generally, the parties to the reaffirmed debt have the same rights and liabilities that each had prior to the bankruptcy filing: the debtor is obligated to pay and the creditor can sue or repossess if the debtor doesn’t pay.
Relief from stay: A creditor can ask the judge to lift the automatic stay and permit some action against the debtor or the property of the estate. If the motion is granted, the moving party (but no one else) is free to take whatever action the court permits. Relief can be absolute, for example, permitting the creditor to foreclose on property, or limited, as for example, allowing the recordation of a notice of default.
Schedules: The debtor must file the required lists of assets and liabilities to commence a bankruptcy case, collectively called the schedules.
Secured debt: A claim secured by a lien in the debtor’s property by reason of the debtor’s agreement or an involuntary lien such as a judgment or tax lien. The creditor’s claim may be divided into a secured claim, to the extent of the value of the collateral, and an unsecured claim equal to the remainder of the total debt. Generally a secured claim must be perfected under applicable state law to be treated as a secured claim in the bankruptcy.
Trustee: the court appoints a trustee in every Chapter 7 and Chapter 13 case to review the debtor’s schedules and represent the interests of the creditors in the bankruptcy case. The role of the trustee is different under the different chapters.
Unsecured: A claim or debt is unsecured if there is no collateral that is security for the debt. Most consumer debts are unsecured.
