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How does bankruptcy impact child support?
Divorce affects your finances in many ways. When you face monetary difficulties after a marital split, bankruptcy can provide relief from overwhelming debts.
It is important to understand the legal process and how it can affect your child support responsibilities.
Child support priority
In Maryland, filing for bankruptcy does not affect the receipt or payment of child support. Maintenance obligations are a high priority in these proceedings. If a former partner owes you child support, the law considers it an asset. If you are the person paying child support, the amount you owe is a non-dischargeable debt. This regulation means that even if you file for insolvency, you are still responsible for fulfilling the payments outlined in your divorce settlement.
Bankruptcy options
You sell your assets to repay creditors in a Chapter 7 bankruptcy. However, child support payments are exempt from discharge.
Chapter 13 bankruptcy allows you to create a repayment plan to settle your debts over three to five years. When filing, the court considers child maintenance payments a priority debt and requires their inclusion in the repayment plan. Failure to include child support amounts in the plan can lead to the dismissal of your case.
Will you lose your retirement accounts in bankruptcy?
Filing for bankruptcy in Maryland can raise concerns about the fate of retirement accounts.
Fortunately, the law protects most retirement accounts during bankruptcy, allowing individuals to retain their savings while seeking debt relief.
Bankruptcy and retirement accounts explained
The federal government categorizes bankruptcy into Chapter 7 and Chapter 13. Chapter 7 involves liquidating assets to pay off debts, while Chapter 13 sets up debt repayment plans. Both categories provide exemptions to protect assets, including retirement accounts.
Protection for retirement accounts
The law safeguards various retirement accounts from creditors in bankruptcy cases. This protection covers 401(k)s, 403(b)s, profit-sharing and money purchase plans, as well as Individual Retirement Accounts and Roth IRAs. This safeguard is consistent across both bankruptcy chapters.
Beware of using home equity to pay debt
Some people file for bankruptcy when they cannot afford their mortgage payments in a bid to stay in their house while they sort out their debt problems. However, if you have mounting debt but have already paid off your mortgage, be sure you do not endanger your home by taking out a second mortgage or a home equity loan.
In an effort to stave off bankruptcy, some homeowners tap into their home equity to pay off their outstanding debts. That might seem like a smart move, but it carries significant risks.
Your house is on the line
When you take out a home equity loan or a home equity line of credit, you put your house up as collateral. This means you must make your payments to your bank on time. If you fail to supply payments as your schedule dictates, your lender can foreclose on your home.
Longer repayment periods increase risk
Home equity loans and HELOCs often have repayment terms of 10 years or more. This extended timeline raises the chances of something going wrong, such as a job loss, medical emergency or other financial hardship that makes it difficult to keep up with payments.
Using backup beneficiaries to guard your assets
Most people want their money and assets to go directly to their loved ones after they die. Unfortunately, sending your property through probate runs the risk of creditors making claims to your estate to fulfill your unpaid debts. Fortunately, people can bypass probate for certain assets by naming beneficiaries.
However, problems may arise if you count on a single beneficiary in your designations. Your assets could fall into the hands of creditors in spite of your efforts.
Asset transfers through designation
Several types of accounts and policies allow the owner to designate beneficiaries who will receive the assets upon the death of the owner. These include life insurance policies, retirement accounts such as 401(k)s and IRAs, annuity contracts, some investment accounts and bank accounts with a payable-on-death designation.
When an account or policy has a valid beneficiary provision, the assets transfer directly to the named individuals or entities. This simple process avoids probate entirely for those assets. Still, this depends on the beneficiary being alive and available to receive the asset.
Benefits of filing Chapter 13 when you own a business
Issues with debt are stressful enough on a personal level, but when you own a business, it can be overwhelming. Luckily, you have options when it comes to filing bankruptcy that can allow you to handle your debt and not lose your business.
Chapter 13 bankruptcy is well worth considering. This bankruptcy option allows you to restructure your debts while keeping your business operational, a key advantage over other bankruptcy chapters.
Retain control of the business
One of the primary benefits of Chapter 13 for business owners is the ability to retain control of your business operations. Other bankruptcy options may require selling off business assets to repay debts. Chapter 13 relies on a manageable repayment plan to repay debts. This enables you to continue running your business.
Prevent repossession
When you file, the court puts an automatic stay in place. This stops all creditor actions, including the repossession of business assets. The stay provides valuable breathing room to reorganize your finances and protect your business assets.
Common reasons seniors may file for bankruptcy in Maryland
Many senior citizens work hard and practice careful financial planning. However, unforeseen circumstances can lead to financial strain.
Sometimes, the strain may prompt some seniors to file for bankruptcy relief in Maryland.
Adult children
Seniors may find themselves financially supporting their adult children, whether through financial assistance with bills, loans or housing expenses. While this support often comes from a place of love and a desire to help, it can strain the senior's financial resources. This is especially true if the children face ongoing financial challenges.
Health care expenses
Seniors often face significant health care expenses, including medical bills, prescription costs and long-term care expenses. Even with Medicare coverage, out-of-pocket costs can accumulate rapidly, particularly for those with chronic illnesses or medical conditions. In Maryland, where health care costs can be high, these expenses can quickly deplete a senior's savings and retirement accounts.
Will I lose my tax refund if I file for bankruptcy?
Understanding how tax filing and refunds work during bankruptcy can be confusing. The rules differ for Chapter 7 and Chapter 13 bankruptcy filings, and they are complex.
Whether you have already filed for bankruptcy or think it may be in your future, you need to understand your tax obligations and how the refund process works. Learning what happens to your refund may help you decide which filing works best for you, but seeking a bankruptcy lawyer's assistance will provide the best information.
Bankruptcy estate
A bankruptcy estate refers to all the property, assets and interests that a debtor possesses at the time of filing for bankruptcy. This includes tangible assets like real estate, vehicles and personal belongings, as well as financial assets like bank accounts, investments and potential legal claims. A court-appointed trustee manages and administers the bankruptcy estate.
In Chapter 7 bankruptcy, a bankruptcy estate comprises the debtor's non-exempt assets, including property and financial holdings. A trustee liquidates these assets to repay creditors.
The consequences of unpaid credit card debt
Credit cards are a convenient and common method of paying for items when you do not have readily available cash. The problem arises when you spend more than you can pay off at the end of the month and accumulate interest.
When interest and late fees add up, it is harder for you to catch up, which perpetuates the cycle, increasing the amount you owe. Besides this, if you find yourself unable to pay off your credit card bills fully and on time, you may face other consequences.
Negative impact on credit score
Failure to pay credit card debt promptly can have a detrimental effect on your credit score. Creditors report late payments to credit bureaus, and as a result, your credit score may decrease. A lower credit score can hinder your ability to secure loans and obtain favorable interest rates. It may even affect employment opportunities that require a good credit history.
Collection efforts
If your credit card debt remains unpaid, creditors may initiate collection efforts. This could involve contacting you directly, either by phone or mail, to request payment. Persistent non-payment may lead creditors to employ debt collection agencies to recover the outstanding amounts.
Understanding Maryland bankruptcy exemptions
When facing bankruptcy in Maryland, knowing what qualifies as exemptions to safeguard your assets can help. The choice between Chapter 7 and Chapter 13 bankruptcy significantly impacts exempted property.
If you are struggling financially but worrying if you will lose your home or car, learning about exemptions in Maryland may ease your mind.
Chapter 7 vs. Chapter 13
In Chapter 7, courts may sell non-exempt assets to repay creditors, potentially affecting your property. However, Maryland's generous exemptions, such as those for homestead and motor vehicles, often allow individuals to retain essential assets.
Chapter 13, on the other hand, involves creating a repayment plan, enabling you to keep your property while gradually settling debts.
If you are able to make regular monthly payments to settle your debts, choosing Chapter 13 can eliminate the worry about losing assets and is probably the better option.
3 possible signs of a foreclosure rescue scam
Navigating a potential foreclosure can be overwhelming. Unfortunately, scam artists often prey on vulnerable homeowners seeking assistance.
Understanding the red flags associated with foreclosure rescue scams helps protect your home and financial well-being.
1. Upfront fees and guarantees
Be cautious of any entity that charges upfront fees for foreclosure assistance. Legitimate assistance programs typically do not require payment until after they have helped you. Be wary, too, of promises that sound too good to be true. Scammers often guarantee they can stop the foreclosure process or ensure loan modification without assessing your specific financial situation. Legitimate assistance providers cannot guarantee specific outcomes, as each case is unique.
2. Pressure tactics and urgency
Scammers often employ high-pressure tactics. The idea is to create a sense of urgency to coerce you into making hasty decisions. Be wary of anyone rushing you to sign documents or transfer ownership of your property. Legitimate assistance processes take time and involve careful consideration of your financial circumstances. If you feel uncomfortable, take a step back and seek advice from reputable sources before proceeding.
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