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Bankruptcy exemptions in Maryland
Filing for bankruptcy is not something that anyone wants to do, but circumstances sometimes dictate that it is necessary. Some people think that it means losing everything to discharge debts, but there are some things that are exempt.
Here are a few of the more common exemptions you might run into.
Support and public benefit earnings
This includes child support payments. It can also include some earnings and public assistance benefits.
Retirement accounts and benefits
Some retirement plans like Individual Retirement Accounts (IRAs), accounts under the Employee Retirement Security Act (ERSA) and other employer-sponsored accounts have almost unlimited protection.
Tax-exempt accounts are also bankruptcy exemptions. Although there are some limitations to this, the majority are at least partially exempt.
Personal property
Some of your personal property is also exempt under bankruptcy proceedings. This includes tools of your trade, clothing and books. The courts also allow for prescribed health aids and medical equipment. You can also keep some of the appliances, books and clothing for your dependents.
Navigating bankruptcy during your retirement
Filing for bankruptcy can significantly lessen your debts and present you with a fresh start. While this is a valuable advantage, you may feel unsettled about starting over during your retirement years.
When you know some of the ways that bankruptcy may impact your retirement experience, you can strategize carefully to minimize collateral damage. With the right process, you can still enjoy your retirement, but without the negative effects of crippling debt.
Mind your assets
Bankruptcy will affect your assets. In what way and to what extent depends on state laws, the type of protection you file for and factors specific to your circumstances. For the most part, any retirement benefits in your name should remain untouched. However, officials may consider assets such as your home, for repayment of some of your debts.
Assess how filing for bankruptcy will impact your assets and your control over them. Working with a legal professional may help you to preserve as much of your assets as possible. Knowing your rights can also help you verify that you have successfully maintained what you rightfully deserve.
Does bankruptcy affect tax refunds?
There are many factors to take into consideration if you are thinking about filing for bankruptcy, but it is especially important to focus on the financial effects of bankruptcy. Although Chapter 7 bankruptcy offers a number of benefits for many people struggling with debt, there are other issues to review. For example, bankruptcy could interfere with your ability to receive a tax refund.
By recognizing potential hurdles, you can prepare for what lies ahead and increase your odds of a more favorable outcome.
How can Chapter 7 interfere with your tax refund?
According to the Internal Revenue Service, there are different reasons why some people do not receive their tax refunds during bankruptcy. For example, the IRS takes some refunds to pay off tax-related debt and in some instances, payment delays have nothing to do with bankruptcy. Moreover, some tax refunds are not delivered due to a turnover request by a Chapter 7 trustee.
How should I prepare for bankruptcy?
Even smart, responsible people can find themselves bogged down by debt. When this occurs, filing for Chapter 7 provides a way for you to get your finances under control, once and for all.
According to Kiplinger, you must prepare for a bankruptcy filing by taking the proper steps. Here are a few ways to help your case.
Curb your spending in the lead-up to filing
There is a belief that Chapter 7 discharges all debt. While it does relieve many types of debt, the court is very wary of fraudulent behaviors. As a result, your spending habits could land you in trouble.
Intentionally racking up debt prior to filing is bankruptcy fraud. The court typically checks the prior 90 days for suspicious purchases, such as vacations or luxury items. You are also not allowed to "sell" property to a friend or family member with the hopes of buying it back later. The court can reverse these transactions and seize the property for repayment.
Be prepared to disclose lots of information
Your assets will undergo a thorough accounting in bankruptcy court. You must answer all questions honestly and transparently. You must disclose all assets in your name, including retirement funds, money from investments, and other sources of income.
What does debt collector misrepresentation look like?
Debt collectors must follow certain laws that protect those in debt from harassment. In addition, they cannot misrepresent themselves, either. This helps people like you stay safe.
But what does misrepresentation mean in this case? How do you know if a debt collector is committing misrepresentation with you?
Harassment and misrepresentation
The Consumer Financial Protection Bureau examines debt collector misrepresentation. The Fair Debt Collection Practices Act (FDCPA) determines what is and is not within a debt collector's reasonable scope of action. They do this for both potentially harassing practices and misrepresentation.
Misrepresentation can come in many forms. For example, a debt collector could lie about the power they can exercise against you. They can make claims of arrest when they have no reasonable cause. They may also make threats that they have no means or intention of following through on.
3 questions to ask yourself when you think about bankruptcy
Whether you are a single parent with children in college or a retiree with rising medical bills, keeping debts paid may be challenging. Have you thought about bankruptcy? Do you know if or when you should file?
Here are a few reasons to help you decide if now is the right time to file for bankruptcy.
1. Are bill collectors calling?
If you owe money on your car, house and credit cards and are behind on payments, you may have gotten calls from debt collectors. Do the calls seem out of control? Be aware of your rights. The Fair Debt Collection Practices Act makes it illegal for them to be abusive or use unfair or deceptive ways to collect debts.
2. Do you only make minimum payments on your credit cards?
Making minimum payments on credit cards keeps your account in good standing. That is about all it does. It does not help much to reduce your debt. There is a minimum payment warning on your bill that shows how much money and how long it will take to pay off your balance if you pay only the least amount each month.
How bankruptcy’s automatic stay provides relief from creditors
Having creditors constantly harass you at home or at work may have you scrambling for a solution, and you may be considering filing for bankruptcy. Bankruptcy may not be appropriate in all situations. However, many people dealing with creditor harassment find that doing so offers them relief in this area. How?
According to LendingTree, once you begin a bankruptcy case, something called the automatic stay comes into play. The automatic stay is an order that prohibits creditors from contacting you and trying to collect on your debts while your bankruptcy case is in process. The automatic stay does not temporarily put an end to all collection efforts or debt obligations, but it does stop the following from happening.
Wage garnishments
If you lose some of your paychecks to wage garnishment, this has to stop once the automatic stay takes effect. As long as the stay remains in place, you should be able to receive your paychecks in their entirety.
Is there an order you must repay debts in?
After filing for Chapter 13 bankruptcy, you have obligations to fulfill. It is important that you do this, too. If you fail to fulfill your duties as a Chapter 13 debtor, you have no second option or "fallback" bankruptcy to choose from.
Thus, it is crucial to understand what your obligations are. This includes the way your debts must be repaid, and whether or not there is an order to it.
First debts to pay off
The United States Courts discuss the basics of Chapter 13 bankruptcy, including the obligations that you have as a debtor. Of these obligations, one includes the order you repay your debts and fees in. For example, it is important that you start by paying off all filing fees accrued while filing for bankruptcy. You cannot start the process without this.
After successfully starting, you need to handle priority debts first. This includes child support, alimony payments, and missed payments to employees. In other words, debts that affect the finances of another person.
Talking to your family about bankruptcy
When you decide to file for bankruptcy protection in Maryland, you may encounter experiences where your family and friends ask about your situation. Bankruptcy is nothing to feel embarrassed about and can actually provide new opportunities for a brighter future.
Knowing how to address inquiries about your situation can help you to feel prepared and confident. You can share the benefits of your decision and highlight how your experience has enabled you to make positive changes in your financial habits.
Protecting details
You are under no obligation to share information about your bankruptcy with other people. As such, if people ask about your situation, you can create a concise answer to satisfy questions without oversharing. When you give too much detail, you may feel self-conscious about what others may think of you.
As a general rule of thumb, you should never give too much information about your financial situation anyway because people may view you as incompetent and lose trust in your ability to manage money. This could affect future opportunities.
Can your credit survive bankruptcy?
One of the benefits of filing for Chapter 13 bankruptcy is that you can repay your debt over the course of three to five years. However, during this time, your bankruptcy will be on your credit report and this can lower your credit score.
There are several steps you can take to repair your credit.
Consider a credit card
According to Nerd Wallet, bankruptcy may keep you from qualifying for some credit cards. However, there are still options available to you. You may get a secured credit card. In this situation, you would pay a deposit upfront, and this deposit would become your credit limit. Additionally, you may ask one of your family members to list you as an authorized user on one of their credit cards. These options are temporary measures that allow you to show lenders that you are recovering from your bankruptcy.
Monitor your credit
As you rebuild your credit, you want to keep an eye on it. Do you know what your credit score is? Watch this score every month on your credit card statements if the company includes it. Is this score going up or down? What factors are affecting this score? These questions can help you determine what you might be able to do to raise your credit score.
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