Filing for bankruptcy isn’t the end of the world. It may even be good for you.
If you or your family are unable to make payments on debts and credit cards at the end of the month, are receiving calls from collections agents, are being sued, or have wages being garnished bankruptcy may erase some or all of your debts and stop these problems.
This law firm’s practice includes serving as a debt relief agency: the firm helps people file for bankruptcy relief under the Bankruptcy Code. We represent debtors filing bankruptcies under chapter 7 of the United States Bankruptcy Code. These Chapter 7 cases are for individuals or married couples seeking to eliminate their debt and make no further payments. In most situations, our clients are able to do so without surrendering any property, vehicles, or real estate to the government or to creditors.
Below are questions we are frequently asked by individuals struggling with debt and contemplating bankruptcy. The answers below are true in most cases, and we base them on our real world experience helping clients in Southern Maryland – but your case may be different. Please call our office at (301) 862-4400 and schedule a free consultation with a bankruptcy attorney today. We’d be more than happy to talk to you about your situation and find out if bankruptcy will work for you.
Are my debts covered by bankruptcy?
Most consumer debts can be discharged (a legal term for “eliminated,” without the need to make any further payments), but not all debts can be discharged in a Chapter 7 bankruptcy. Most debts which cannot be discharged fall into one of the following categories:
That is not a terribly long list. That is because most debts, including the ones listed below, are dischargeable in bankruptcy:
Can I afford a bankruptcy attorney? Can I do it on my own?
Petitions for bankruptcy are filed in the federal court. Preparing a bankruptcy petition involves much investigation of your personal finances and precise, accurate reporting of the details of your case on complex forms written in legalese. As an example, the average bankruptcy petition filed by our clients is about fifty pages long.
Is it possible to do this on your own? It is. But you’ve heard the saying about why you wouldn’t perform surgery on yourself: pay a doctor who knows what he’s doing and have it done right. Filing for bankruptcy is no different. Finding a qualified bankruptcy attorney can be the difference between a smooth and successful bankruptcy or a sloppily done mess that could see your petition being dismissed because of problems with the documents you’ve filed.
The good news is that most clients find bankruptcy lawyers affordable for the services they render. At Baldwin Briscoe & Steinmetz, we handle bankruptcies on a flat fee basis, and we will quote you your fee, including any and all court costs, at our initial consultation. That means you will know from the beginning exactly what your case will cost to prepare and file.
Are there alternatives to filing bankruptcy?
Bankruptcy is not the only solution. Before filing for bankruptcy some clients turn to so-called “debt management” or “debt settlement” companies. There are many, many such companies operating across the country. The particulars will vary, but often these companies operate on the same basic principle: they offer to negotiate with your creditors to reduce your debt (or monthly payment), and in return you pay them for their services. There is never any guarantee that their approach will be successful; a creditor may work with them, or your creditor may not. Often times these debt management companies will ask you to cease paying your debts and make those payments to them instead, to give them a pool of money to negotiate with. Relying on these debt management companies can carry significant risks: there is no guarantee of success, and you may very well end up wasting money and time for no result.
Many debtors assume working with a debt settlement company will be better in the long run, because there will be less of a decline to their credit scores. But the credit reporting agencies will still know if debts are paid off or settled for less than full value; your score will still be affected. The months, or longer, that a company can take to negotiate payment is also time that you could spend filing for bankruptcy, receiving a discharge, and beginning to rebuild your credit. And if at the end of those months a debt settlement company turns out to be unsuccessful, you will be months and thousands of dollars behind.
Bankruptcy offers one thing that debt settlement companies cannot: certainty. Bankruptcy is governed by federal law, and the odds are very good that by the end of your initial consultation you and our attorney will have a very good idea about which of your debts can be discharged and which, if any, cannot. And once a bankruptcy case is filed with the court there is a clear, straightforward path to receiving your discharge from the court.
What types of bankruptcies are there?
For individuals there are two types of bankruptcies: Chapter 7 and Chapter 13. There are many differences between the two, but the general difference is this: in a chapter 7 bankruptcy, your debt goes away forever. A chapter 13 bankruptcy puts your debts on a three or five year repayment plan. Chapter 13 bankruptcies are much more complex, time intensive, and expensive for consumers; some consumers, however, have no option but to file a chapter 13.
One other key difference between a chapter 7 and chapter 13 is how your property will be handled. In a chapter 7 bankruptcy the government has the right, in theory, to take some of your property to sell, and distribute the proceeds to your creditors. In practice only a very small minority of chapter 7 filers have any property taken by the bankruptcy court. That is because every state allows debtors to exempt at least some, and most often all, of their property from being taken. Maryland, in particular, has generous exemptions. The vast majority of clients we assist keep all of their property after bankruptcy. Discussing your assets is a part of every bankruptcy consultation, and by the end of our initial meeting we should have a clear idea of what, if any, property of yours could be taken.
Am I eligible for a chapter 7 bankruptcy?
Not everyone is eligible for a chapter 7 bankruptcy. Eligibility is tied to your monthly income. A casual internet search for eligibility for a chapter 7 bankruptcy will turn up something called the “means test.” The means test, in so many words, looks at your monthly income and compares it to your monthly expenses for food, clothing, rent or a mortgage payment, utilities, transportation, and other monthly expenditures the bankruptcy court believes are essential. If your expenses are more than your income, you “pass” the means test and are considered eligible for a chapter 7 bankruptcy; if there is significantly more monthly income than there are monthly essential expenditures, the bankruptcy court may determine that some of those funds should be applied to your debts and will convert your case to a chapter 13 bankruptcy.
If your household makes less than the median income for a household of the same size in your state, it is automatically presumed that you pass the means test.
Beyond being financially eligible, there are a few requirements that have to do with time and your state of residence. To file for bankruptcy in Maryland you must have lived in this state for at least the last six months, and you must not have filed for chapter 7 bankruptcy in the last eight years.
As with most other factors that determine whether bankruptcy will be possible for you, we should be able to determine in our initial consultation whether it’s likely you’ll be eligible for a chapter 7 bankruptcy.
What happens to my property in a chapter 7 bankruptcy?
Most filers retain all of their pre-bankruptcy property during and after the bankruptcy. Only individuals with many assets, significant equity in their home, or a large amount of liquid funds typically have anything to worry about. The reality is that most people who consider filing for bankruptcy are not in those positions.
Secured property – for example, a vehicle that still has a loan on its title – will be dealt with on a case-by-case basis. In most cases you will be able to retain that property, but you will need to continue making payments on it.
Will I be able to keep my car?
If your car does not have a loan on it, you can keep your car after filing a chapter 7 bankruptcy petition so long as you are able to claim it as exempt. If you do not have a significant amount of other assets it is very likely you will be able to do so.
If your car does have a loan on it there is a way for you to keep your vehicle. Depending on your creditor you may be able to enter into what is called a reaffirmation agreement. This reaffirmation agreement says, in so many words, that you will keep the car, but will continue to make payments on the car and continue to be held personally liable for it even after the bankruptcy. If you fall behind on your car payments following the bankruptcy your creditor can repossess your vehicle and pursue you for the remaining balance on the loan, just as if there was no bankruptcy. You will need to be current on your vehicle payments to be offered a reaffirmation agreement.
The second way to handle your vehicle is to surrender it through the bankruptcy process. You will not keep it, but your car debt will be treated like your other dischargeable debt: you will not have to make any further payments, and your creditor can never come after you for the balance on the loan, no matter how much of a loss they sell your car for at auction.
Many lenders offer a third approach that works very similarly to a reaffirmation agreement. There is no formal reaffirmation agreement to sign, but these lenders will not repossess your vehicle if you keep your payments current. These lenders still have the right to repossess your vehicle if you fall behind, but because there is no formal reaffirmation agreement they cannot pursue you for the balance of the loan after repossession. Unless the vehicle must ever be repossessed it remains yours, and title does not change because you filed for bankruptcy.
Will I be able to keep my house?
If you do not have a significant amount of equity in your home or if it is underwater you will most likely be able to keep your house in a chapter 7 bankruptcy, provided you can continue to make mortgage payments.
If making your monthly mortgage payment will be difficult for you even after the rest of your debts are eliminated you may need to seek a mortgage modification or other housing program to make your mortgage. This is independent of bankruptcy, and there is no guarantee your lender will be able to bring your monthly mortgage to an amount you can afford.
If you are behind on your mortgage and facing foreclosure a chapter 13 bankruptcy can provide you with time to get caught up on those payments. This is not possible through a chapter 7 bankruptcy.
How long does a chapter 7 bankruptcy take?
The typical chapter 7 bankruptcy takes about three months to work its way through the court. Cases rarely deviate from that timeframe.
What should I do to prepare?
There is little you need to bring to your bankruptcy consultation. At a minimum, know your personal annual income, your household’s annual income, and have a clear idea of what debts you owe, how much debt you owe, and what property you own. This is the minimum information we’ll require to examine your case and determine whether you are a good candidate for a chapter 7 bankruptcy. A credit report, while not essential at the initial consultation, would help you present a clear picture of your debts and what you owe.
If after the consultation you and we both decide bankruptcy is a good solution for you we will require much more documentation. Those include, among other things, copies of your recent pay stubs, copies of your most recent tax returns, copies of bank statements, and other documents related to your financial situation. These are documents that the courts will require you to supply either before or during your bankruptcy case, and we will go over them beforehand to ensure that any problems, red flags, or irregularities are caught and addressed well beforehand – and not during your bankruptcy case.
Will I need to go to court?
Most bankruptcy cases require only one “court” appearance by a debtor. This, in truth, is not even a court appearance, but a meeting between you, your bankruptcy attorney, and a trustee appointed by the bankruptcy court to review your petition and ensure that it is properly filed and the information you report in it is true. This meeting typically happens at the US Trustee’s Office in Greenbelt, Maryland, although they are being conducted remotely via Zoom or telephone for the duration of the COVID-19 emergency.
These meetings are typically quick and smooth. We spend a great amount of time before filing to work through your petition with you and address anything that we think may be of interest to a bankruptcy trustee; where necessary, we will often make notations in your petition to answer any questions a trustee may have before you appear in front of them. We also take the time to go over this meeting and personally prepare you for it well in advance.
I’m being sued for money I owe – will your firm help me in that case?
If debts go unpaid, most lenders will, at some point, initiate a collections case against you. If that happens, they will file a lawsuit against you in either district or circuit court and attempt to obtain a judgment against you.
Baldwin, Briscoe & Steinmetz does represent clients in civil litigation and creditor defense. These are separate cases from your bankruptcy petition, and in most every situation would require a separate retainer and fee to be paid if you wish us to represent you in this case. But most bankruptcy clients find it unnecessary to do so.
Filing for bankruptcy freezes any and all collection efforts against you – including lawsuits. If you file for bankruptcy any other pending lawsuit against you to collect a debt that will be covered by bankruptcy must stop until your bankruptcy finishes. And your creditor cannot resume a lawsuit for a debt discharged by bankruptcy, even if that lawsuit was filed before your bankruptcy case.
Can I recover from filing bankruptcy?
There is a light at the end of the tunnel, and bankruptcy is no different.
Bankruptcy is a significant decision, with significant consequences. In almost every case there will be a significant drop to your credit score after you file for bankruptcy, and there is no hiding or avoiding that fact. However, the reality is that most debtors who file for bankruptcy already have low credit scores. For most, the damage is already done.
Bankruptcy is a way to take control of your life and stop a downward spiral from growing worse. And with good financial management, your credit score will begin to improve immediately once a bankruptcy discharge is granted. And 12 to 18 months after filing, it is not uncommon that filers have credit scores equal or better than those they had before filing for bankruptcy.
Doing things like taking out secured credit cards and paying off its balance at the end of every month, making sure your payments are made on time, and responsibly managing your credit are all ways to begin improving your credit score immediately upon the close of your bankruptcy case.
And you will be able to receive loans again; the lenders know that you can only file for chapter 7 bankruptcy once every 8 years, too. If for no other reason, there are lenders who will offer you credit solely because they know they can count on being able to pursue you during those 8 years.
Baldwin, Briscoe & Steinmetz is a local firm, with local attorneys. At our firm your case is worked by a trained bankruptcy lawyer, not a paralegal or junior staff. And unlike many large bankruptcy firms whose business model is to work many cases at once and spend as little dedicated time on yours as possible, we pride ourselves on getting the job done right, working our cases hard, and ensuring that we will be able to deliver what we promise, and not just “put it in front of a judge and see what they say.”
Our small size also means that you will always have a personal contact as well. From initial consultation to final discharge and close of the case you will have one lawyer who will work with you. And our ability to work and meet with you is flexible; we understand most people work, and can’t always easily take off time during the work week to meet with a lawyer. Simply call us up when you’re able and explain that you want to speak about filing for bankruptcy, and we’ll go from there.
