If you have come to this web site, then you are looking for information to help you with your current financial problems. Creditor pressure can be unbearable. Simply answering creditor calls with “I don’t have the money right now” is not going to solve your financial problems. We understand this pressure and the need for relief.
You may feel helpless and unable to deal with your current problems. This helplessness can affect your relationships with your loved ones, your friends and your co-workers. Your worries keep you from focusing on things that really matter – your family and your job. Without a program to deal with your financial issues, you will see these issues taking up more and more of your time and energy. And yet there are strategies you can implement to resolve these issues.
Bankruptcy is a federal law that is applicable in all states. Under the Bankruptcy Code, Congress announced a public policy that an honest debtor is to be entitled to a “fresh start.” Congress recognized that people may get caught up in events beyond their control, including divorce, unemployment or illness, and may not be able to satisfy the financial obligations that they incurred. This fresh start that bankruptcy provides is important not only from the point of view of the individual but also from the point of view of society as a whole.
You have various options when you file a bankruptcy proceeding. In a chapter 7 proceeding, a trustee is appointed to liquidate non-exempt assets. Not all debtors can qualify to immediately file a chapter 7 proceeding.
In chapter 11 and chapter 13 proceedings, a plan is proposed to pay back creditors some or all of what is owed over a period of time. The decision as to which chapter is best for you is dependent on the facts of your case.
So, how is this “fresh start” accomplished? There are three components of this fresh start and these concepts are applicable to all bankruptcy proceedings that can be filed.
Upon the filing of a bankruptcy petition, the bankruptcy statute provides immediate relief from creditor actions. The filing of a bankruptcy case automatically stops creditors from attempting to collect on the obligations you owe. Once the bankruptcy case is filed, a creditor cannot call you, cannot send you notices, and cannot file a lawsuit against you or continue any suit that had already been filed. If a creditor has already obtained a judgment against you, it cannot take any action to collect on that judgment, including garnishing your bank account or paycheck. If your paycheck is being garnished, that will stop. A creditor is prevented from commencing or continuing a foreclosure proceeding on real property. In other words, a creditor’s right to enforce its claim against you or your assets will be frozen from the moment your case is filed.
The automatic stay is designed to give you breathing room. You no longer have to be afraid to answer your phone, collect your mail, or even answer your door. If a creditor does call, you simply advise them you have filed a bankruptcy proceeding and give them your attorney’s name and number.
In some instances, a creditor can ask the court for relief from the automatic stay. For example, if you own your home, subject to a mortgage and you are not making your mortgage payments, and if the value of the home is less than the outstanding balance owed to the creditor, the mortgage lender may seek relief from the automatic stay so that it can proceed with a foreclosure sale in state court. If the foreclosure occurs and the creditor is not paid in full from the proceeds of the foreclosure sale, that deficiency will be dealt with by the bankruptcy proceeding.
Upon the filing of a bankruptcy proceeding, all of the assets that you own are transferred to a bankruptcy estate. In a chapter 7 case, a chapter 7 trustee is appointed by the court to take control of these assets and it is the job of the trustee to liquidate these assets and make a distribution to creditors from the proceeds of this liquidation.
In a chapter 7 case, the trustee is looking out for the interests of the unsecured creditors. Should the home you own be subject to a mortgage and home’s value is less than the amount owed, the trustee is not likely to sell the home for the sole benefit of the mortgagee. In this way, you may be able to keep your home, vehicle and other such items.
The Bankruptcy Code gives you the right to reclaim certain assets before the trustee gets to sell them. In other words, the exemption statutes give you credit to buy back your property from the Chapter 7 estate. If you qualify for Maryland exemptions, you are generally entitled to claim up to $12,000 of value in your assets, up to $22,975 of the value of the equity in your home, as well as the value of your qualified retirement plans regardless of amount, and, in most instances, the cash value of life insurance or annuity policies. There are other exemptions that may be available to you as well. The idea of the exemptions is to provide you with a certain amount of assets to begin anew after the bankruptcy process is completed.
Order of Discharge
The main goal of any bankruptcy proceeding is to obtain an order of discharge. This order permanently stops creditors from taking any action against your future income or future assets on account of those debts that existed before the bankruptcy filing. If you own an asset that is subject to a lien, that creditor’s lien will continue on the asset, and that creditor will continue to have rights against the asset in the event you do not make payments (such as your mortgage or car payment). Aside from secured debts and those debts that survive the bankruptcy (see below), once your discharge order is entered, creditors will not be able to exercise any of their collection rights against you or any assets that you obtain after the bankruptcy case was filed.
Certain debts are not discharged. Some debts are not discharged due to the type of debt that is owed, including domestic support obligations, most taxes, restitution, student loans and DUI judgments. Certain other debts may not be discharged if the court orders it so.
The above is a simple overview of the relief that is available to you to resolve your financial issues in bankruptcy. The process is more complex than what is discussed above. Bankruptcy may not be the only way to resolve your financial problems and there may be other avenues we can discuss that will provide you with a roadmap to financial freedom.
In the event you meet with us, each case is handled by an experienced attorney and the decisions are made based on the facts of each case. Our firm prides itself in educating our clients as to their options in either proceeding with a bankruptcy filing or developing a strategy to deal with creditors outside of the bankruptcy arena. It is our goal to have our clients address the financial issues facing them by giving them the information needed to make an informed decision. If your financial issues are not business related, our initial consultation is free.