Why Chapter 7 Bankruptcy in Prince Georges County Does Not Mean You Will Lose All Your Stuff
A Chapter 7 bankruptcy discharge can provide almost immeasurable benefits for individuals buried in debt and/or facing harsh collection practices. However, many people delay filing Chapter 7 because they fear losing real estate, personal property and assets that took a lifetime of hard work to acquire. When a person delays filing for Chapter 7, however, the result can be seized assets, bank account levies and asset forfeitures. In other words, Chapter 7 often provides the most effective way to protect your assets from creditors.
The common misconception that Chapter 7 means surrendering your assets is understandable given that Chapter 7 bankruptcy is referred to as “liquidation bankruptcy”. In theory, Chapter 7 involves the U.S. Bankruptcy Trustee liquidating a debtor’s assets to distribute the proceeds among creditors. However, debtors keep all of their property in almost all Chapter 7 bankruptcies because they have no assets that cannot be protected by a Maryland bankruptcy exemption. This type of bankruptcy is referred to as a “no asset Chapter 7”. Bankruptcies where no assets are available to be distributed to creditors account for virtually all Chapter 7 discharge cases.
The bankruptcy exemption system is expansive enough to allow most debtors to protect most, if not all, of their assets. Maryland like other states has a state exemption system. Although other states permit debtors to choose between federal and state exemptions, Maryland law requires bankruptcy filers to use Maryland’s list of exemptions. However, debtors filing bankruptcy in Maryland also can use federal non-bankruptcy exemptions that cover a range of assets, including but not limited to multiple types of public employee benefits relating to retirement benefits, death and disability benefits, survivor benefits and more.
Some exemptions are not subject to a limit on the amount that can be protected while other exemptions have a maximum value. Artful use of these exemptions will typically allow a person filing for Chapter 7 to keep all property. An experienced Prince Georges Chapter 7 attorney can maximize use of available bankruptcy exemptions. This artful use of exemptions might include:
- Selecting the best exemptions for property covered by multiple exemptions
- Doubling the value of exemptions for a married couple when allowable
- Taking advantage of non-bankruptcy federal exemptions
- Strategically utilizing the wild card exemption
- Planning for your Chapter 7 by legally converting non-exempt assets to exempt assets
- Determining the appropriate timing for filing your bankruptcy to avoid scrutiny of transactions by the U.S. Bankruptcy Trustee
If you have significant value in assets that cannot be protected in Chapter 7, your Prince Georges bankruptcy lawyer might suggest a variety of strategies. One strategy often involves adjusting the date you plan to file bankruptcy, so transactions fall outside the U.S. Bankruptcy Trustee “look back period.” This term refers to the window of time during which the trustee can examine transactions by the debtor. Improper transfers of assets or preferential treatment of creditors or insiders can be voided by the trustee if they occur during this period. The look back period is 90 days prior to filing a bankruptcy provided the other party involved in the transaction is not an insider like a family member or business in which the debtor has an equity or interest. The look back period is 12 months in the case of insiders. Sometimes it will be appropriate to delay filing bankruptcy to avoid fraudulent conveyance claims by the U.S. Bankruptcy Trustee.
The bottom line is that an experienced Prince Georges County Chapter 7 bankruptcy attorney can protect your assets and help you avoid fraudulent conveyance claims. We invite you to contact us at 866-96-GMLAW. We represent debtors in Chapter 7, Chapter 11 and Chapter 13 bankruptcies throughout Baltimore and the surrounding area.