A Primer on Bankruptcy: Definition, Causes, the Financial Danger Zone, Your Car and Bankruptcy

Bankruptcy 101

Filing for a bankruptcy can be an incredibly intimidating task for most people, especially the inexperienced. There’s nothing to be feared! You can get assistance from Baltimore’s bankruptcy lawyer: Richard Hackerman.

Let’s do a quick crash course on the fundamentals of bankruptcy.

Bankruptcy is defined as “a legal status of an individual or entity wherein they cannot repay debts to their creditors.” Bankruptcy is often initiated by the debtor, and in most jurisdictions is imposed by a court order.

Basically, you’re legally stating that you’re unable to pay your debts.

You might be wondering:

“Why do people declare bankruptcy?” and “How does declaring bankruptcy help me?”

It’s simple:

People find themselves in a rut (financially, personally, socially) that they find hard to get out of, and where they find it even harder to fix their problems with other people.

Common reasons of filing bankruptcy are:

Unemployment, overextended credit, enormous medical bills, and marital problems.

It goes without saying that these kinds of situations don’t seem so far-fetched from the lifetime’s experience of an average American.

The financial danger zone

There is what experts call the “financial danger zone,” a situation full of red flags for your financial wellbeing.

You might be asking “how do I know my financial danger zone?”

Here are some signs:

  • You’re only making minimum payments for your credit cards
  • You’re being called by debt collectors
  • You’re anxious of sorting out your finances
  • You use credit cards to pay for basic needs
  • You’re unsure of how much debt you have

It’s wise to avoid these kinds of situations before they actually happen. But if you do find yourself nodding along when you ask these things to yourself, you might want to hire a reliable Baltimore bankruptcy attorney to help you should you decide to declare.

Your car and bankruptcy

One of the biggest things people consider if they should declare bankruptcy is their property.

People have asked:

“Can I keep my car when in bankruptcy?”

What will happen to my property when I declare bankruptcy?”

And other similar questions.

This is a pretty technical topic to give a quick discussion in a blog post, so it’s better you consult, but here are two important pointers to consider:

  • Auto exemptions. Most exemption laws allow a person a certain amount for a car when figuring if it should be seized by the trustee. This exemption amount depends on which state you live in. Maryland for example doesn’t give motor vehicle exemptions, but you can use a wildcard exemption for cash or property up to 6000 USD in value, plus an additional 5000 USD of value in personal property.
  • This is important for people with car loans. Equity is the value of the property less the balance of the loan. So for example, if you have a 5000 USD car and a 3500 USD loan balance, you’ll have to either file for an exemption in your state or continue making your regular payments to the lender. If you don’t have equity, you don’t have to worry about the trustee taking your car to settle the debt.

That’s it for today’s blog post.

A summary of the topics:

  • Bankruptcy is a legal status of a person/entity wherein they cannot pay debts to their lenders
  • Common reasons for bankruptcy range from unemployment to marital problems to seriously overextended credit
  • The financial danger zone is a red flag signaling that you might need to declare bankruptcy
  • Equity and state exemptions are two important pointers when considering what will happen to your car (and other assets) in bankruptcy

For more help on these topics, contact Baltimore’s bankruptcy attorney: Richard Hackerman. Trusted, professional, and ready to help you! Call us now at 410-243-8800, or at 888-243-5500.

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