Law Offices of Frank B. Cahn, P.A.

Dealing with financial problems can be stressful. An experienced attorney can provide you with useful information to help you decide on the best course of action to ease those problems. This website gives a general outline of how bankruptcy works. For further details and to address specific concerns, please call (410) 358-4338 to schedule your free 
consultation.

THE BANKRUPTCY REFORM ACT OF 2005

Changes to the U.S. Bankruptcy Code which took effect on October 17, 2005 have placed some limits on filing bankruptcy. The most important change depends upon whether a debtor earns more than the median income in the County in which
he or she resides. People who earn under this amount can usually file bankruptcy just as they would have under the old law. Those who earn more than this amount may still file bankruptcy. However, they must complete a complicated form setting out their income and expenses to determine what type of bankruptcy relief they are eligible for.

CHAPTER 13 BANKRUPTCY

Chapter 13 bankruptcy is a Court ordered repayment plan. Creditors may object to the terms proposed by a Chapter 13 plan, but it is up to a Judge to decide whether those objections are legally sound. If a proposed plan meets the requirements of the U.S. Bankruptcy Code, a Judge will require creditors to accept its terms.

The mechanism for carrying out a Chapter 13 repayment plan is to have debtors make monthly payments to a Court-appointed Trustee who is then responsible for paying creditors according to the terms of the plan. In Maryland, once a Judge approves a repayment plan, the Court will issue an Order to your employer to have the monthly payments sent directly to the Trustee.

Chapter 13 bankruptcy is especially helpful in dealing with foreclosure cases. A lender must stop foreclosure proceedings when a Chapter 13 bankruptcy is filed. The debtor is then permitted to catch up any back payments on the mortgage by making payments through the Trustee.

Another advantage of Chapter 13 is that certain debts which are not wiped out by bankruptcy, such as most student loans and taxes, can be included in the repayment plan. In a few cases, it may be possible to have a Judge reduce the balance owed on a vehicle loan to the fair market retail value of the vehicle and then pay it through the Trustee. When available, this option permits you to save money on vehicle loans and lower monthly 
payments.

How much you must pay under a Chapter 13 repayment plan depends on a number of factors. The Court will consider your ability to pay as reflected by your budget and will also take into account whether creditors are receiving at least as much in a repayment plan as they would get if your assets were liquidated in a Chapter 7 case.

The law permits a Chapter 13 repayment plan to run from 36 to 60 months. Those who earn more than the median income in the County in which they reside may only elect a 60 month plan.

A Chapter 13 bankruptcy case is initiated by filing certain 
paperwork with the U.S. Bankruptcy Court. The debtor and his or her attorney must then appear for a hearing conducted by a Court-appointed Trustee. At least seven (7) business days prior to the hearing, the debtor must provide the Trustee with copies of paystubs for the sixty (60) day period prior to the filing of the case and with tax returns for the prior three (3) years. The Trustee may request additional infromation as well. For example, those who own real estate must provide documentation of the value of their property. At the hearing itself, the Trustee will ask questions to clear up any questions he or she has about information provided in the paperwork. 
The Trustee will also review the some of the requirements of Chapter 13 bankruptcy so that the debtor understands his or her responsibilities.

About one month after the meeting with the Trustee, the debtor and his or her attorney usually attend a second hearing, this time before a Judge. The Judge will review the terms of the proposed repayment plan and decide whether or not to approve it. Sometimes, if the debtor is making all payments required by the plan and the Trustee is satisfied with its terms, the Judge will confirm the plan based upon the Trustee's recommendation, and no further hearing will be necessary.

HOW DOES BANKRUPTCY AFFECT YOUR CREDIT RATING?

Federal law gives credit reporting agencies a right to report bankruptcy on a credit report for up to ten (10) years. However, there is no law which prohibits a creditor from granting a loan to a person who has filed for bankruptcy. Feedback from clients who have gone through bankruptcy 
indicates that many are able to finance vehicles and homes. Whether any given individual will be eligible for credit after filing a bankruptcy depends mainly on his or her financial circumstances at the time the application is made.

Please note that while your bankruptcy is in progress, you may not enter into a loan agreement without Court permission.

Call (410) 358-4338 for your free consultation.

Convenient to Owings Mills, Pikesville, Randallstown, Reisterstown, Security, Towson, Windsor Mill, and Woodlawn.

FEDERAL LAW REQUIRES US TO INFORM YOU THAT WE ARE A DEBT RELIEF LAW FIRM WHICH ASSISTS PEOPLE IN FILING FOR RELIEF UNDER THE U.S. BANKRUPTCY CODE.