On October 17, 2005, the most sweeping bankruptcy reform legislation was passed which marks the first significant change to the bankruptcy laws in more than twenty-five (25) years. Although the new law, known as the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005, brings with it sweeping changes to the process for filing bankruptcy, it also requires debtors to receive credit counseling as a prerequisite for eligibility to file. In addition, the new law also requires that debtors who have completed the bankruptcy process undergo post-bankruptcy education to ensure their future use of credit privileges comes with an understanding of the rights and responsibilities for debts incurred after their bankruptcy discharge is entered. Although the new laws bring additional burdens, such as increased time and expense, most individuals will still qualify for bankruptcy. The purpose of the new law was to steer more people into filing a "pay back" plan. Fact of the matter is, it didn't work as well as Congress thought.

The process of bankruptcy is very complicated but with the assistance of the attorneys at Belsky, Weinberg & Horowitz, LLC, it can be an easy and successful process. As part of our representation, we will meet with you in person to determine your annual income using what is known as the "means test", where we will request that you provide proof of income for the last seven months. A complicated mathematical computation will be performed by us to determine what your average income is. The means test is used to determine whether you fall above or below the median family income for counties in Maryland.

Once we have performed the means test, we will ask you a series of questions about what you owe, what you own, what you earn and what you spend each month on household expenses. You may wish to refer to our online bankruptcy intake form (www.marylandbankruptcylawyers.com) to learn more about the questions we will ask you at our initial consultation. If you wish, you may fill out the form online and submit it to us in advance of scheduling an in person meeting. This will speed up your intake and will assist us in preparing for our initial meeting.

Once we have met with you and performed the appropriate evaluation of your financial situation, we will advise you as to the best course of action to take in dealing with your debt. In many instances, bankruptcy may be the most appropriate course of action for you to take. In other instances, non-bankruptcy solutions such as consumer credit counseling and non-bankruptcy debt reorganization may be best suited for your needs. In many instances the greater the amount of debt and the longer that debt has been in existence, the more likely it will be that bankruptcy relief is best for you.

Below is an explanation of the bankruptcy process for both Chapters 7 and 13. Each circumstance presents different requirements and obligations of both the attorney and the client and the description below is based upon the experiences of the average client. Should you wish to discuss your case further, please do not hesitate to contact us. We are glad to serve you and have represented thousands of people in Maryland and the District of Columbia in consumer bankruptcies of all types.

Chapter 7

Chapter 7 is often referred to as a "straight" or "liquidation" bankruptcy. The federal bankruptcy court appoints a "trustee" to determine whether creditors will get paid. A common mis-perception by those contemplating bankruptcy is that they will lose everything they own if they file a bankruptcy. This is, however, not necessarily true. In the state of Maryland, so long as the debtor has resided in the state for at least the last two years, the debtor is able to exempt a maximum of $12,000 of property. Maryland law allows the debtor the ability to exempt $1,000 of miscellaneous clothing and furnishings, $5,000 worth of personal property, and $6,000 of any other property the debtor owns (the "wildcard exemption"). So long as the debtor's total property value is less than the exemption amounts listed above, the Trustee will not be able to seize any of the debtor's property and the debtor will receive a discharge of their debt so long as other "New Law" requirements are met.

Prior to filing the Chapter 7 Bankruptcy Case, the debtor must provide the last seven months of income statements (i.e., pay stubs, pension statements, social security income statements, etc...), the most recently filed tax return (in some instances the last 3 years of returns are required), and also attend a counseling session with a certified debt counselor. The debtor must receive a counseling certificate from the debt counselor. This certificate is then filed with the Bankruptcy Court. If the certificate is not filed, the Court will automatically dismiss the debtor's case.

The last seven months of paystubs are required because the Court looks to see if you qualify for Chapter 7 bankruptcy by analyzing your recent income history. The attorneys at Belsky, Weinberg, & Horowitz, LLC, will sit down with you and calculate what is called your "current monthly income" ("CMI"). Once your CMI is calculated, the CMI is then annualized to see what your projected current annual income will be. The next step is to determine whether or not your "current annualized income" is greater than or less than the median income level for your household size in the county where you reside, for ex.:

Debtor lives by himself in Baltimore City and grosses

$2,000 per month and has been a salaried employee

for the last year. His annualized income is, therefore,

$24,000 per year ($2,000 per month X 12 months).

According to the 2005 IRS guidelines, the median

household income for a 1 person household

in Baltimore City is currently $48,205. Because the debtor's current annualize income is less than the IRS median household income, the Debtor automatically qualifies for Chapter 7 and can proceed to filing a Chapter 7 without having to fill out the means testing form.

What happens if the debtor's annualized income is greater than the IRS median income level for debtor's household? In some situations, the debtor may be forced to propose a "Chapter 13 Plan of Reorganization" which proposes to pay back a percentage of all the debts the debtor owes over a 3-5 year period. In other situations, the debtor may still be able to file in Chapter 7 bankruptcy, but in order to do so the debtor now must take the next step and complete the means test. The means test is a long, complex, and rigorous calculation which takes into account the debtor's CMI and compares it to the IRS allowable deductions for the debtor's geographic locale. The purpose of the means test is to determine whether or not the debtor is able to pay any money back to his or her creditors in a Chapter 13 Plan. The means test itself is a four page form that is used to supply all of the debtor's current annualized income information while deducting all of the applicable IRS allowable expense deductions. Once the means testing form is complete, a proposed plan payment amount is calculated. If the proposed plan payment amount is "0" or negative, then the debtor qualifies for Chapter 7 bankruptcy. If the debtor is able to pay back some money to his or her creditors, then the means test will advise that if this debtor files a Chapter 7 bankruptcy case, a "presumption of abuse" will arise. This presumption of abuse means that the debtor must file a Chapter 13 Case and Plan, because the means test calculates that the debtor can afford to pay something back to his or her creditors. This presumption can only be refuted by exceptional circumstances. Absent exceptional circumstances, the trustee will file a motion to dismiss the debtor's case and the attorney filing a "presumption of abuse case" is subject to costs and sanctions. If a presumption of abuse arises, the debtor's only bankruptcy option will be to file in Chapter 13 Bankruptcy, which is described below. The means test and the corresponding IRS allowable deductions are very complex. With the assistance of the attorneys at Belsky, Weinberg, & Horowitz, LLC, we will be sure to help you make this bankruptcy process a smooth one.

Once the debtor has complied with the preliminary requirements outlined above, the debtor is ready to file the bankruptcy case. Our office files all cases electronically and in many instances can be filed the same day of your initial intake interview at our firm. Once the case is filed, within one week the Court will send notice of when the "Meeting of Creditors" is to be held. Although referred to as the Meeting of Creditors, in most instances creditors are not present. This hearing usually takes place about thirty (30) days after the Debtor's petition is filed. The debtor must bring with them a picture ID and a Social Security Card, W-2 or pay stubs with the debtor's Social Security number listed. For cases filed where the debtor lives in Baltimore City, Baltimore County, Anne Arundel County, Harford County, Howard County, Cecil County, and Carroll County: all Meetings of Creditors will take place at, 101 W. Lombard St., Federal Courthouse, 2^nd floor, Baltimore, MD 21201 and Confirmation Hearings are held at, 101 W. Lombard St., Federal Courthouse, 1^st or 9^th floor, Baltimore, MD 21201. For cases where the debtor lives on the Eastern Shore (Queene Anne's County and East), all meetings and hearings are held at the U.S. Post Office Building, 129 Main Street, Room 104, Salisbury, MD 21801. For cases where the debtor resides in any county not already mentioned, the Meeting of Creditors will take place at, the Office of the United States Trustee, 6305 Ivy Lane, Rooms 620-621, Greenbelt, Maryland 20770 and Confirmation Hearings are held at, the United States Bankruptcy Court, 6500 Cherrywood Lane, 3^rd floor, Greenbelt, MD 20770.

The Meeting of Creditors is simply an opportunity for the "Trustee" to question the debtor and review the debtor's paperwork. The Trustee is looking to see whether or not the debtor qualifies to be a debtor under Chapter 7 Bankruptcy and whether or not the debtor has any assets which are not exempt that can be sold and the proceeds used to pay creditors a percentage of what is owed. This meeting typically takes about ten (10) minutes to conduct. Once the meeting is concluded, if there are no outstanding issues, then the Trustee will recommend that the debtor receive a Discharge of their debt. As part of the new law, the Debtor must complete a Personal Financial Management class at the conclusion of their bankruptcy case. Once this class is completed a certificate is issued to the debtor certifying completion of the class. This certificate must then be given to the debtor's attorney so that it may be filed with the Court. If this certificate is not filed within 45 days of the Meeting of Creditors, then the debtor's bankruptcy case will be closed with no discharge being entered.

Certain debts cannot be eliminated in bankruptcy including, but not limited to: certain taxes, child support, alimony, marital property settlement obligations, criminal restitution payments, tickets, citations, fines, debts incurred through fraud or false pretenses, student loans, and consumer debts owed to a single creditor for luxury goods or services incurred by a debtor in the amount of $500 or greater within the last 90 days before the bankruptcy petition is filed. In addition, cash advances totaling more than $750 that are extensions of credit under an open end credit plan obtained by a debtor on or within 70 days before the filing of the petition in bankruptcy cannot be eliminated. Although this is not an exhaustive list, you should ask your attorney at Belsky, Weinberg, & Horowitz, LLC, how your bankruptcy will impact your ability to discharge your debts.

Chapter 13

Chapter 13 is often referred to as a "reorganization bankruptcy " or a "pay back plan bankruptcy". Debtors that choose to file this type of bankruptcy submit to the Bankruptcy Court a written "plan" that will propose to pay in full all missed payments to mortgage or car loan companies arising prior to the bankruptcy filing date. Missed payments on secured loans such as mortgage or car loans must be paid in full whereas unsecured debts such as credit card debt could be paid a minimal amount (as little as 15 percent). Unpaid attorneys' fees in connection with your bankruptcy representation can also be included in this plan. The amount of the plan payment can be calculated only after a thorough evaluation of the debtor's assets, liabilities, and income stream.

People that typically file this type of case are facing foreclosure of their home or repossession of their car. This bankruptcy stops creditors from being able to foreclose or repossess so long as the Chapter 13 case is filed before the foreclosure or repossession date.

In the State of Maryland, there is no legal means by which to regain possession of a properly foreclosed upon home after the foreclosure sale date. As in Chapter 7, the debtor still must comply with all of the pre-filing requirements such as providing the last seven months of income statements (i.e., pay stubs, pension statements, social security income statements, etc.), the most recently filed tax return (in some instances the last 3 years of returns are required), and also attend a counseling session with a certified debt counselor. The debtor must receive a counseling certificate from the debt counselor. This certificate is then filed with the Bankruptcy Court. If not, the Court will automatically dismiss the debtor's case.

In a Chapter 13 case, a Trustee is appointed to review whether the payments proposed by the debtor's Chapter 13 plan are sufficient. The Trustee will either recommend "confirmation" of the plan by the Court, or will object to confirmation due to the insufficiency of the proposed plan payment, the failure of the debtor to remain current on post-bankruptcy payments, or other reasons.

In a Chapter 13 case, the purpose of the Meeting of Creditors is essentially the same as in Chapter 7 except that the Trustee will confirm that the debtor understands the need to remain current on "plan payments" and monthly payments to secured creditors. The Trustee may seek additional information on the valuation of the debtor's real estate and the debtor's wages. The Trustee will also confirm that the debtor is aware of the date and time for the "Confirmation Hearing" to be held at the Bankruptcy Court. The Trustee may also provide written information to the debtor which explains in simple terms how the Chapter 13 process works and what the debtor must do to ensure a successful case.

In Chapter 13, unlike Chapter 7, there is an additional step that will require the debtor's attendance at a "Confirmation Hearing" where the court will either approve or disapprove of the debtor's proposed Chapter 13 Plan. In most instances, if the plan is prepared properly, it will be approved at the hearing without having to appear before a judge. After the Plan is approved, the debtor must be sure to make all Plan payments each month for the duration of the Plan, which cannot exceed 60 months.

Upon Confirmation of a Chapter 13 Plan, the debtor who abides by the terms of the Plan and who remains current on secured loans, will not have to appear in court again. Remaining current on these payments is critical to the success of the Chapter 13 case. Otherwise, the court, at the request of an aggrieved creditor, may dismiss the case or allow the creditor to take collection action despite the "automatic stay" which normally prohibits such action.

For more information, call Antonio Aquia at 410-234-0100.

As part of our representation of individuals in Chapter 13, we review the following checklist items with each prospective client to ensure the Chapter 13 plan and bankruptcy schedules are accurate and will result in a successful case. 

Schedule G discloses all executory contracts and unexpired leases to which you may be a party.  In this Schedule you must disclose any and all unexpired leases of real or personal property or other type of agreements, such as realtor agency agreements, royalty or commission agreements, car leases, apartment rental leases etc..., to which you are an obligated party.  The disclosure requires the names and complete mailing addresses of all parties associated with the lease or contract described.  In the left hand column you will list the name and mailing address of all parties associated to the agreement, contract or lease.  In the right hand column, you will list a description of the lease or contract, the nature of your interest in the lease or contract, and whether or not you wish to assume or reject any particular agreement or lease.  Remember, Bankruptcy law requires full disclosure.  Any omission could impact your ability to receive a fresh start.  To learn more, contact the attorneys at Belsky, Weinberg, & Horowitz, LLC. 

Do you think you are the only one in the Bankruptcy Boat? Think again!

U.S. consumer bankruptcy filings reached 126,434 in July, the highest amount since the Bankruptcy Code was overhauled by Congress in October 2005, according to data from the National Bankruptcy Research Center (NBKRC). The struggling economy, job loss, and rising financial distress has most assuredly contributed to the rise in filers. Many consumers, struggling with mounting credit card debt, higher mortgage payments, and higher prices are feeling the squeeze on their wallets. This debt burden, coupled with loss of jobs, cuts in hours, and cuts in pay have many Americans feeling the pinch. When debt payments are missed, creditors often seek State Court intervention in trying to recoup monies that are owed. Usually, consumers act quickly by sprinting to the Bankruptcy Court for refuge, typically in an attempt to protect their wages from garnishment. Others, do not always act so quickly and stand to lose 25% of their gross wages that are then deducted from their net pay. As American Bankruptcy Institute Executive Director Samuel J. Gerdano put it, "Today's bankruptcy filing numbers reflects the sustained and growing financial stress on U.S. households. Rising unemployment on top of high pre-existing debt burdens is a formula for higher bankruptcies through the end of this year." If you are contemplating filing bankruptcy, it is always better to do it sooner rather than later. Contact the attorneys at Belsky, Weinberg, & Horowitz, LLC, for a fee consultation.

Schedule D discloses any and all creditors that retain liens against any of your real or personal property. These types of creditors are typically referred to as "secured creditors". Common examples of secured creditors include mortgage companies, car loan companies, financing companies, and other banking type institutions that may lend you money and retain a lien against whatever property being purchased by you with the money lent. Secured creditors also include creditors that have been able to obtain a judgment against you and have attached that judgment as a lien against your property. Other creditors that may become secured creditors pursuant to Federal or State law also include homeowner's associations, municipal billing authorities for items such as water bills, property taxes, or for other municipal charges that then become secured against real property owned by you. Federal and State income taxes, trust fund taxes, or any other type of tax owed by you may also become a secured debt against your property. Schedule D is designed so that the left hand column lists the name and address of the secured creditor, the next column to the right describes who is liable for the debt and whether the secured debt is unliquidated, disputed, or contingent, the next column then describes the property which secures the debt, such as a car or a home. The following two columns list the total amount owed on the secured debt and whether any of the total amount owed is unsecured (meaning that the secured creditor is owed more than what the property securing the debt is worth). There are other events that could create a secured debt in real or personal property requiring you to disclose that secured creditor. To learn more, contact the attorneys at Belsky, Weinberg, & Horowitz, LLC.

Now that we have discussed where to list all of your assets, lets talk about how they are treated in your bankruptcy case. In order not to lose assets by way of a trustee seizure in a Bankruptcy case, you must be sure that the assets are exempt under appropriate exemption law. Originally, the Bankruptcy Code allowed for exemptions to be applied to the value of any assets you desired to retain, however, the individual States were later allowed to "opt-out" of the Federal Exemption scheme and substitute their own set of exemptions for its own State residents. Some States' exemption statutes are more generous than the Federal Exemptions, but Maryland's Exemptions are actually a little less favorable. If you have been a resident of the State of Maryland for at least two years just prior to the filing of your bankruptcy case, then you must apply Maryland Exemption law. If you did not live in the State of Maryland for the 2 years prior to the filing of your bankruptcy case, then you may either have to apply your prior residence State's Exemptions or the Federal Exemption Statute, you should consult an attorney to be sure which to choose.

Under Maryland law, you are allowed $12,000.00 worth of asset exemptions. Any property that you own which has equity that exceeds the $12,000.00 limit may be seized and liquidated by the Chapter 7 Bankruptcy Trustee to pay your creditors, or if in a Chapter 13 you could be forced to pay an amount equal to the value that exceeds the exemption limit to your creditors, but still retain possession of your property. In the state of Maryland, you are allowed $1,000.00 total for household goods and furnishings exemptions. The remaining $11,000.00 worth of exemptions can be used to protect the remainder of your assets be it real or personal property. Now, you may be getting nervous to file bankruptcy because you have been saving for retirement in a 401 k or IRA. Don't be nervous, as these monies are usually 100% exempt allowing you to still have the funds available for your retirement, so long as they are qualified retirement plans recognized by the Internal Revenue Service. 401 k's, 403 b's, 457 a's, SEP IRA's, Simple IRA's. These qualified retirement accounts have their own exemption, and there is no limit to that exemption. To be sure your retirement asset is exempt, consult an attorney. The same thing applies to life insurance. Remember whole life policies will generally have a cash surrender value, and that amount can only be protected with the remaining $11,000.00 of real and personal property exemptions allowed to you under Maryland law. Term life insurance policies typically have no cash value, but nonetheless would be exempt under Maryland law as money payable in the event of accident, sickness, or death. Also, claims for personal injury or Worker's Compensation Claims are usually exempt as money payable in the event of accident, sickness, or death, but any lost wage component of those claims would have to be exempt under the real or personal property exemption statutes under Maryland Law. Applying exemptions is very complicated, consult an attorney before you end up losing your property!

For more information visit our website at www.legalteam.net or call our bankruptcy department from anywhere in the state at 1-800 895-5333.

 

 

In Bankruptcy proceedings, all of your personal information is disclosed in schedules ranging from Schedule A through Schedule J. We will look at these schedules one at a time and explain the type of information that must be listed in these schedules in order to successfully complete your bankruptcy case.

What is a Schedule A?

Schedule A discloses real property that you own. Real property is considered to be items such as homes, condominiums, land, buildings, time shares, and so on. In any bankruptcy case, all of your real property must be disclosed in Schedule A, regardless of whether or not the real property is your place of residence, an investment property, or belongs to someone else but you are just listed on the deed for inheritance purposes. So long as your name is listed on the deed or on title to the real property, you have a legal ownership interest in the real property and are required to disclose it. Schedule A generally includes a column for a description of the real property such as, its address, whether it is a single family home, town home, or duplex, a separate column regarding the real property's estimated fair market value, and a column disclosing the total amount of any secured claims or mortgage balances secured against the real property. All real property you have an interest in must be listed on Schedule A regardless of your intentions of keeping the property or not. Even if your name is not on title to the real property, but you have an equitable interest in the real property, you are required to disclose that asset. An equitable interest may arise in real property, if for example, a person has passed and has left you their home, even though you are not listed on the deed,. Another example would be during the course of divorce proceeding and you are awarded your spouse's home and your name has still not been listed on the deed to the home. There are other events that could create an equitable interest in real property requiring you to disclose that asset. To learn more, contact the attorneys at Belsky Weinberg, & Horowitz, LLC

Anyone who has filed for consumer bankruptcy protection knows there is a great many pages of paperwork that must be completed before the filing.  There are several categories of papers:  the Statement of Financial Affairs, which is a list of questions that must be answered, the Schedules (A-J) that require disclosure of all assets and liabilities of various types, a Notice of Intention regarding the debtor's intention to retain or surrender secured property, the Disclosure of Compensation Form, which requires identification of any person accepting money to prepare the papers and the amount they charged, and the Matrix of Creditors, which serves as the main mailing list for the case.

In the series of discussions that will follow, we will discuss each form in greater detail and examine the intricacies of some of the issues presented when determining the appropriate answer to the questions being asked in the Statement of Financial Affairs, and the property and liability issues requiring disclosure in the Schedules.

In the end, we hope you will gain a better understanding of the complexities of a bankruptcy filing and contact a qualified lawyer for assistance if you are considering a bankruptcy.  The attorneys at Belsky, Weinberg and Horowitz, are always available to speak with you with your questions.  Call us toll free at (800) 895-5333.