A Chapter 7 bankruptcy in Maryland is a federal court process intended to eliminate most debts. Also known as a liquidation, this type of bankruptcy facilitates an orderly process for helping people who can no longer pay their creditors. It is a sale of the debtor’s nonexempt property with a distribution of the proceeds going to creditors.
Before filing for a Chapter 7 bankruptcy, you are required to participate in credit counseling. The credit counselor must be on the list approved by the Office of the United States Trustee for Maryland.
If you are considering filing for a Chapter 7 bankruptcy, you may need to take the Maryland Means Test depending on your income. If your income is below the Maryland median for your household size, you are exempt from the test. If your income is above the Maryland median for household size, you must complete the Means Test to determine whether you must pay back a portion of your debt through a Chapter 13 bankruptcy.
Exempt debts in a Chapter 7 bankruptcy cannot be sold to satisfy creditors. Debts that cannot be eliminated or sold because they are exempt include:
- Child Support
- Debts not included in the bankruptcy
- Student loans unless there is a hardship exception
- Criminal fines and penalties
- Debts or judgments that are the result of injury or death that are the result of a “driving under the influence” event
- Income tax debt
- General tax debt
A Chapter 7 bankruptcy attorney in Poolesville, Montgomery County can determine whether you might qualify for a Chapter 7 bankruptcy. The attorney will help you identify which of your assets to sell to pay off your debt and those that cannot be sold because they are considered to be exempt.
How Does A Chapter 7 Bankruptcy Begin?
The process of a Chapter 7 bankruptcy can take from four to six months to complete and begins by filing a petition with the court. To open a bankruptcy case in Maryland, you must file several documents at the same time including:
- Matrix Verification of Matrix
- Statement of Financial Affairs
- All Schedules
- Summary of Schedules
- Notice to Individual Debtors
Schedules include a list of assets and liabilities as well as a schedule for your current income and expenses. The court also requires a Statement of Financial Affairs (SOFA) that has questions about recent financial transactions that do not fit on any of the other required bankruptcy documents. Other required documents are a schedule of executory contracts and unexpired leases and recent tax returns.
Additional miscellaneous items required under the bankruptcy include: a Social Security Number Verification Page; a disclosure of compensation of the attorney representing the debtor; a Statement of Intent; a Chapter 7 Means Test; and a Certificate of Credit Counseling.
Individuals with mostly consumer debts have additional requirements for filing documents. They must provide a certificate of credit counseling and a copy of a debt repayment plan developed as a result of the credit counseling. Those filing for a Chapter 7 must provide evidence of payment from their employers 60 days before filing. In addition, a statement of monthly net income and any anticipated increase in income or expenses after filing for the bankruptcy must be provided. If someone filing for a Chapter 7 bankruptcy has federal or state qualified education or tuition accounts, they must provide records for those accounts.
What Happens After Filing For A Chapter 7 Bankruptcy?
Immediately after filing for a Chapter 7 bankruptcy, the court sends a notice to all of your creditors informing them that you have filed for a Chapter 7 bankruptcy. The notice informs the creditor that there is a court order known as a “stay’ to immediately cease all efforts to collect any debts you owe them.
The bankruptcy court appoints a trustee to take legal control of your debts and all property except for property that was deemed exempt. A meeting of creditors takes place within six weeks of your filing, so the trustee has an opportunity to review your documents and asks questions about your finances. On occasion, creditors may attend this meeting. At this point, you relinquish your property, and the trustee then sells the property and pays off your creditors. After a period of time, remaining debts are discharged.
It is important to know that you cannot file for another Chapter 7 bankruptcy for eight years. However, you may file for a Chapter 13 bankruptcy four years after receiving a discharge for the Chapter 7 bankruptcy. Also, there are fees associated with your bankruptcy case that include a case filing fee, and administrative fee, and a trustee surcharge.