The New Year is a time for fresh starts and financial resolutions. For many individuals in Maryland, getting control of debt is a top priority. If you’ve found yourself struggling with overwhelming debt, bankruptcy could be the solution that helps you regain control and start the year debt-free. However, bankruptcy is a serious decision that requires careful consideration.
In this blog, we’ll explore when filing for bankruptcy is the right option, how the process works, and how a Maryland bankruptcy lawyer can help you navigate the process.
Understanding Bankruptcy: What It Does and Doesn’t Do
Before deciding to file for bankruptcy, it’s important to understand what it can and cannot do. Bankruptcy is a legal process that provides relief from overwhelming debts by either discharging or restructuring them. There are two main types of bankruptcy for individuals: Chapter 7 and Chapter 13.
- Chapter 7 Bankruptcy: Often referred to as "liquidation bankruptcy," is designed for individuals who have little to no disposable income. It involves the liquidation of non-exempt assets to pay off creditors, and any remaining debt is typically discharged. Most people who qualify for Chapter 7 keep their essential assets, such as their home and car, while unsecured debts like credit card balances and medical bills are wiped clean.
- Chapter 13 Bankruptcy: This option is for individuals who have a steady income but are struggling to keep up with debt payments. Instead of liquidating assets, Chapter 13 allows you to restructure your debts into a manageable repayment plan, typically over a period of three to five years. At the end of the repayment period, any remaining eligible debts are discharged.
When to Consider Bankruptcy to Start the New Year Debt-Free
Now that we’ve covered the basics of bankruptcy, let's discuss when it might be the right time to consider this option. While each person’s financial situation is unique, here are some signs that bankruptcy could help you achieve a fresh financial start for the New Year:
You’re Overwhelmed by Unsecured Debt
If you’re drowning in unsecured debt, such as credit card debt, medical bills, or personal loans, and there’s no realistic way to pay it off, bankruptcy may be a viable option. Chapter 7 can eliminate this type of debt quickly, giving you a fresh start. Even under Chapter 13, you can significantly reduce your overall debt burden through a manageable repayment plan.
You’re Facing Foreclosure or Vehicle Repossession
If you’re behind on mortgage payments or car loans and are facing foreclosure or repossession, bankruptcy can provide relief. Chapter 13 bankruptcy allows you to catch up on missed payments while protecting your home and vehicle from being taken. Filing for bankruptcy triggers an automatic stay, which stops all collection efforts, including foreclosure proceedings.
You’re Experiencing Wage Garnishments
If creditors have started garnishing your wages to recover unpaid debts, bankruptcy can put an immediate stop to garnishments. Filing for bankruptcy triggers the automatic stay, preventing creditors from taking further action against you while your case is being processed.
You’ve Been Using Credit Cards to Cover Basic Living Expenses
When you’re relying on credit cards to cover essential expenses like rent, groceries, or utilities, it’s a sign that your financial situation has spiraled out of control. If you find yourself unable to make more than the minimum payments on your credit cards each month, bankruptcy may provide a way out.
You’re Being Harassed by Creditors
Constant phone calls and letters from creditors can take a toll on your mental and emotional health. Filing for bankruptcy puts an end to creditor harassment by enforcing an automatic stay. This legal protection ensures that creditors must stop contacting you once you’ve filed for bankruptcy.
You Don’t Qualify for Debt Relief Programs
If you’ve already explored other debt relief options, such as debt consolidation or credit counseling, but still can’t get your finances under control, bankruptcy might be the best remaining option. While debt relief programs can help reduce interest rates or consolidate payments, they may not be enough if your debt burden is simply too high.
The Bankruptcy Process in Maryland: What to Expect
Filing for bankruptcy is a structured process that requires careful attention to detail. Here’s what you can expect when filing for bankruptcy in Maryland to start the New Year debt-free:
Consult with a Bankruptcy Lawyer
Before filing, it’s important to consult with a bankruptcy lawyer to determine whether bankruptcy is the right option for your situation. A lawyer can assess your financial circumstances, explain your options, and guide you through the process. Your lawyer will also help you decide which type of bankruptcy (Chapter 7 or Chapter 13) is best suited to your needs.
Complete Credit Counseling
Before you can file for bankruptcy, you must complete a court-approved credit counseling course. This course is designed to help you explore alternatives to bankruptcy and ensure that you fully understand your financial situation.
Filing the Petition
Once you’ve completed credit counseling, your lawyer will file a bankruptcy petition on your behalf. This petition includes detailed information about your debts, assets, income, and expenses. After filing, the automatic stay goes into effect, stopping all collection actions by creditors.
The Bankruptcy Trustee and Creditors’ Meeting
A bankruptcy trustee will be appointed to oversee your case. The trustee will review your financial information and may sell any non-exempt assets to pay creditors in a Chapter 7 case. You’ll also be required to attend a meeting with your creditors, during which they can ask questions about your financial situation. Your bankruptcy lawyer will be there to guide you through this process.
Discharge of Debts
Once your case is finalized, most or all of your eligible debts will be discharged, freeing you from the burden of those obligations. This means you’re no longer legally responsible for repaying the discharged debts, and you can begin the New Year with a clean slate.
When Bankruptcy May Not Be the Best Option
While bankruptcy can provide significant relief, it’s not the right solution for everyone. You may want to consider alternative debt management strategies if:
- You have secured debts, such as a mortgage or car loan, that you want to keep.
- You have the ability to repay your debts with a more aggressive budgeting strategy.
- Your debt primarily consists of student loans, child support, or other non-dischargeable debts.
Contact Maronick Law to Discover Your Bankruptcy Options and Start the New Year With a Fresh Financial Start
Bankruptcy can be a powerful tool for getting out from under overwhelming debt and starting the New Year with a clean financial slate. If you’re dealing with constant creditor harassment, wage garnishments, or the threat of foreclosure, filing for bankruptcy could be the first step toward a brighter financial future. Consulting with a bankruptcy lawyer will help you understand your options and guide you through the process.
Contact Maronick Law today for a consultation. You can call us directly at 443-551-2747 or fill out our online contact form to discuss your bankruptcy options and begin the process of financial recovery. We’re here to help you regain control of your finances and start the New Year debt-free.
Disclaimer: The information provided is not legal advice and does not establish an attorney-client relationship.