Is Chapter 7 Bankruptcy in Your Future?

Baltimore Bankruptcy Law Firm Helps Clients Make a Fresh Start

Bankruptcy is a legal process in which someone who is unable to pay their bills can get out from under them and obtain a fresh financial start. In 2020, 529,106 Americans filed for bankruptcy, nearly double that of seven years prior. In Maryland, there were 3,638 bankruptcy filings during that time, and 78 percent of those were chapter 7 bankruptcy filings.

How Does Chapter 7 Bankruptcy Work?

When an individual or a business with limited assets files for chapter 7 bankruptcy, also known as liquidation, they can erase most or all their unsecured debt (bills not secured by collateral like credit card balances, medical bills, and payday loans. In a chapter 7 proceeding, the bankruptcy trustee will collect all the debtor’s assets, liquidate (sell) any non-exempt resources, and use the proceeds to pay off as much of their unsecured debt as possible. Any remaining unsecured debt will be wiped out (discharged).

However, certain types of debt cannot be discharged in a Chapter 7 bankruptcy. These debts include:

  • Alimony or spousal support

  • Child support

  • Fraudulent debts

  • School loan balances

  • Certain taxes

Although a debtor can erase most or all their unsecured debt in a chapter 7 bankruptcy, they will be allowed to keep certain property through a series of federal or state exemptions. Every state has its own set of property exemptions, and some allow debtors to choose between the federal exemptions and theirs. However, Maryland does not recognize the federal bankruptcy exemptions and instead requires those who file for bankruptcy in the state to use its set, which includes:

  • Home equity. Cash value up to $25,150.

  • Personal property. Up to $6,000 of the as-is value of tools, furniture, clothing, electronics, and other household items.

  • Insurance. 100 percent of life insurance policy payments and equity.

  • Retirement accounts. The value of pension plans and defined contribution plans like 401(k)s.

  • College savings plans. College tuition savings accounts and other tax-deferred savings accounts.

  • Public benefits. Including VA disability benefits, Social Security benefits, and child support benefits in most cases. 

  • Wages. 75 percent of earned but unpaid wages.

  • Wildcard. Petitions may protect up to $6,000 in otherwise nonexempt property.

If the debtor wants to retain certain secured property that is not covered under an exemption, they can do so by signing a reaffirmation agreement, but they must make the back payments before the debt will be reaffirmed. 

The attorneys at Atkinson Law have extensive experience with chapter 7 bankruptcy. We are very familiar with the Maryland laws that govern bankruptcy and will take a thorough inventory of your financial circumstances - assets, debts, and monthly income - to provide solid advice regarding the best course of action to take.

Contact an Experienced Baltimore Bankruptcy Lawyer Today

Are you buried under a mountain of debt and looking for the way out? Contact Atkinson Law online or call 410-882-9595 (Baltimore office) or 443-384-0013 (Bel Air Office) to schedule your free initial consultation. Our skilled bankruptcy attorneys will help you weigh your options and determine whether filing for bankruptcy is right for you.