In Anne Arundel County, Maryland, bankruptcy is a legal proceeding in which a person or business has some or all of their debts legally absolved, when they are unable to pay them. This hopefully allows them to start over with a clean slate and move on, after having learned to better manage their use of credit in the process. However, bankruptcy should not be treated as a way to avoid debt that one simply doesn't feel like paying. It is meant to be a safety net for people or businesses who are honestly unable to pay off their debts. Because bankruptcy is not without negative consequences (such as a severely damaged credit rating for many years afterward), it should be viewed as an option of last resort.

Therefore, it is prudent to consult with an experienced Anne Arundel County, Maryland bankruptcy attorney, who can advise you of the costs and benefits of bankruptcy. Because the decision to file for bankruptcy depends very heavily on the facts of each individual case, the advice of a Anne Arundel County bankruptcy attorney cannot be substituted.

Types of Bankruptcy in Anne Arundel County, Maryland

In Anne Arundel County, Maryland, 3 types of bankruptcy procedures are in common use: Chapter 7, Chapter 11, and Chapter 13. Being governed by federal law, the procedures involved in filing for bankruptcy in Anne Arundel County, Maryland will be about the same as anywhere else in America. Chapter 7 bankruptcy, or "liquidation," requires the debtor to sell some of his or her property to the highest bidder, and using the proceeds from the sale to pay down as much debt as possible. Once the sale is fulfilled, all dischargeable debt is deemed paid in full, whether or not the sale was able to raise the entire amount owed. You should note that some property (usually the types of property deemed essential) is fully or partially exempt from liquidation, meaning that the debtor gets to keep it. This includes houses, cars, and retirement accounts, among others. Some types of debts, however, cannot be discharged in bankruptcy, including taxes, child support, and student loans.

The other common bankruptcy scheme used by consumers in Anne Arundel County is Chapter 13 bankruptcy. In this system, debt is not discharged. Instead, it is restructured. This allows the debtor to have the terms of the contracts that gave rise to their debts in the first place thrown out, and replaced with new terms that call for a structured repayment plan, designed to allow the debtor to survive on whatever income they have, and allowing the creditors to get paid back eventually. Once a payment plan is approved, creditors are not allowed to attempt to collect payment under the original agreements. Although it can be used by individuals, Chapter 11 bankruptcy is used almost exclusively by businesses. Not unlike Chapter 13, Chapter 11 focuses on restructuring of debt, rather than discharging it. Chapter 11 requires that the debtor come up with a reorganization plan designed to reduce debt and cut costs. Before being executed, this plan must be approved by a majority vote of participating creditors.

One main advantage of Chapter 11 bankruptcy is that it allows businesses to continue their operations while the process plays out. Additionally, their stock can still be bought and sold.

How Can a Anne Arundel County Bankruptcy Lawyer Help?

The decision to file for bankruptcy in Anne Arundel County is not one to be made lightly, and it certainly should not be made without first obtaining the advice of an accomplished Anne Arundel County bankruptcy attorney.