What is Chapter 7 Bankruptcy?
Chapter 7 bankruptcy is sometimes referred to as “straight” bankruptcy or “golden” bankruptcy. Often considered an ideal scenario for people who are struggling financially, Chapter 7 bankruptcy is essentially a liquidation of debts, as it can clear out most forms of personal debt with some exceptions. In Maryland, eligibility to file for Chapter 7 bankruptcy is determined by a “means test”. If your income falls below the threshold determined by the means test, you may be able to file for Chapter 7 bankruptcy and still retain your assets. Each person’s financial situation is unique. Our bankruptcy attorneys will explain all options and provide a recommendation for the best course of action based on your individual circumstances.
Once you file a bankruptcy petition in the Maryland bankruptcy courts, an automatic stay is placed on your file, which means collectors must immediately halt any and all collection activity. This includes harassing letters, relentless phone calls and even wage garnishment activities. In addition to the benefit of the automatic stay, a successful Chapter 7 bankruptcy petition can eliminate your debts so that you can start over financially. In fact, most unsecured debts can be eliminated as part of a Chapter 7 bankruptcy. Unsecured (or dischargeable) debts include:
- Credit card debt.
- Medical bills.
- Utility bills.
- Past due rental payments.
- Personal loans.
It is possible that some property will be reclaimed during a Chapter 7 bankruptcy petition. Most debtors get to keep all their assets, but at a minimum you will be allowed to keep necessities in order to maintain a healthy measure of living. In addition to essential items like a home or car, it may be possible to hang onto other property by “reaffirming” those debts during the bankruptcy petition. In addition, as long as you were a Maryland resident for at least two years prior to filing, you may be able to retain a portion, or possibly all, of your assets.
In general, the maximum exemption for personal items allowed in the state of Maryland for a Chapter 7 bankruptcy is $12,000 per individual or $24,000 per couple. An experienced Baltimore bankruptcy lawyer can discuss additional exemptions with you and help minimize your risk of any property loss. Because of the complexity of issues such as reaffirmed debt in a bankruptcy case, it is essential to work with an experienced attorney.