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CalAttorney2
CalAttorney2, Attorney
Category: Legal
Satisfied Customers: 10238
Experience:  Civil litigation attorney for individuals and businesses.
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I would like to ask some questions about bankruptcy. I live

Customer Question

I would like to ask some questions about bankruptcy. I live in Maryland. I filed personal bankruptcy over 20 years ago, after a divorce left me with overwhelming debt. After that, I worked hard to make sure that both me and my new husband recovered our good credit ratings. After a while, we were able to live comfortable, normal lives with some small debt, but nothing overwhelming. Then my husband became ill with lung cancer. During the ensuing 18 months, after which time he passed away, while he was undergoing treatments and while I was being a caretaker, I was able to use both his disability checks and my paychecks to completely eliminate any remaining debt. After my husband passed away, I used money received from life insurance policies as a down payment on a new home. At that point in time, my credit was near perfect. I was able to buy a wonderful home, and have made it a new start for myself. The unfortunate part of having near perfect credit is that everyone will extend more credit to you and then more again. Until you have way more credit available than you could ever repay. I found myself in a situation where this snowballed out of control, and by abusing this overextended credit, I am now in way over my head. Between trying to decorate and furnish my new home, and by spinning out of control with my used of the credit cards, I have accumulated slightly over $50K in credit card debt, and I am struggling to make my mortgage payment while trying to pay towards this debt. I am enrolled in a debt management program that negotiated my monthly payments down somewhat with the creditors, but I am still struggling to even make the payment to them. My question is this...am I able to file for Chapter 7 bankruptcy to eliminate my debt, and yet still keep my house, car and other belongings?
Submitted: 1 year ago.
Category: Legal
Customer: replied 1 year ago.
I also emptied my 401K to try to help with this when I changed jobs about 5 months ago. The new job is paying me $5K less per year than I was previously making.
Expert:  CalAttorney2 replied 1 year ago.

Dear Customer,

Chapter 7 bankruptcy is a "liquidation" bankruptcy in which a debtor's assets are sold or liquidated in order to pay off creditors. The debtor is entitled to retain a small amount of assets (called "exempt" assets - see: http://www.nolo.com/legal-encyclopedia/maryland-bankruptcy-exemptions.html), but these exemptions generally do not cover all of your assets if you have significant assets (such as a home).

You can consider a Chapter 13 bankruptcy (a debt repayment chapter) in which your "disposable income" is used to repay your creditors over a 5 year period (creditors must receive at least as much in your Chapt. 13 plan as they would in a Chapt. 7 liquidation), but please carefully review the terms of any such plan, 5 years is a long time and modification of a plan to adjust for unexpected decreases in income can be very difficult to get.

I would strongly advise that you speak with a local bankruptcy attorney prior to filing any bankruptcy (especially as you are a homeowner). While it is possible to file for bankruptcy protection on your own, it is not a very good idea and an attorney can help you maximize your post-discharge financial position as well as ensuring you do not make errors in your petition which can have significant impacts on the dischargability of your various debts.