Collection calls, a foreclosure date, a garnishment coming out of every paycheck. If that is where you are, bankruptcy is worth understanding properly instead of through rumor. It is a federal legal process. Not a moral failure, and not a loophole either. For a lot of Maryland families and small businesses it turns out to be the most orderly way out.
What filing actually stops
An automatic stay takes effect the moment your petition is filed. Most creditors have to stop collecting right then. No more collection calls, no repossession, no garnishment, and any pending foreclosure or collection lawsuit is halted. A creditor who wants to resume has to ask the bankruptcy court for permission first.
The stay is powerful, but it is not unlimited. Some proceedings continue regardless, and child support and alimony are the usual examples. A creditor can also ask the court to lift the stay in particular circumstances. If a foreclosure sale or a repossession is already on the calendar, timing matters a great deal, so get advice before the date rather than after it.
Discharge and distribution
Two ideas hold the process together. Discharge is the part most people come for: qualifying debts are wiped out, and creditors can never collect on them again. Distribution is the counterweight, where the court makes sure whatever assets exist are shared among creditors in the order the law sets. Understanding that second half explains most of what otherwise looks arbitrary, including why the court asks so many questions about property and recent transfers.
Chapter 7 or Chapter 13
Individuals and small businesses in Maryland almost always file under one of two chapters. Which one fits depends less on preference than on your income and what you are trying to hold onto.
Chapter 7 is a liquidation. It suits people carrying a lot of unsecured debt, usually credit cards and medical bills, who pass a means test comparing household income against Maryland’s median for the same household size. It moves fairly quickly, and most filers keep their essential property through Maryland’s exemptions. If your debts are primarily business related rather than consumer debts, the means test may not apply to you at all.
Chapter 13 is a reorganization for people with steady income. Rather than liquidating, you repay what you can under a court-approved plan lasting three to five years, and the balance is discharged at the end. It is the right tool when you need to catch up on a mortgage and keep the house, or when you have non-exempt property worth protecting, or when your income is too high for Chapter 7. In some situations the discharge at the end of a Chapter 13 plan is actually broader than what Chapter 7 offers.
Chapter 11 is the reorganization route for businesses that intend to keep operating while they restructure.
Where Marylanders file
Maryland bankruptcy petitions go to the United States Bankruptcy Court for the District of Maryland, which sits in two divisions. The Northern Division courthouse is in Baltimore City and the Southern Division is in Greenbelt. Which one hears your case depends on where you live. Our office is in Baltimore, within walking distance of the Northern Division courthouse.
What happens first
Federal law requires you to complete an approved credit counseling course before you can file. It is usually a short online or telephone session from an agency approved for the District of Maryland. After filing you will attend a meeting of creditors with the trustee assigned to your case. Most individual filers never appear before a judge at all.
Talk to a Baltimore bankruptcy attorney
Whether Chapter 7, Chapter 13, or something other than bankruptcy is the right answer depends on details worth working through with someone before you commit. Jan Berlage will look at your income, your property, and what you are trying to protect, then tell you plainly which options are actually open to you.
Call (410) 752-9300 or use the contact form on this page to arrange a consultation.