If you are struggling with debt in Maryland, filing for bankruptcy may help you get immediate relief from your creditors and offer you a fresh start. The two most common consumer bankruptcy options are Chapter 7 and Chapter 13. While both can address overwhelming debt, they work in different ways.
To help understand your options better, here are their key benefits and differences.
Understanding Chapter 7 bankruptcy
In a Chapter 7 case, a bankruptcy trustee may sell certain non-exempt assets to pay creditors. In many cases, however, people filing for Chapter 7 can keep most or all their property. This is because Maryland bankruptcy exemptions can help protect essential assets.
Chapter 7 cases are usually completed within a few months. It can effectively eliminate many unsecured debts, such as credit card debt, medical bills and personal loans. However, not everyone can qualify. Your income and financial situation must fall within the requirements of the “means test.”
Understanding Chapter 13 bankruptcy
Also known as “reorganization bankruptcy,” Chapter 13 empowers you to create a repayment plan for all or part of your debt and typically lasts for three to five years. People filing for Chapter 13 make monthly payments to a trustee, who pays off the creditors according to the approved plan.
Chapter 13 is often useful for people who have a stable income and want to catch up on car payments or other secured debts. It can also safeguard assets that might not be fully protected in a Chapter 7 case. However, unlike Chapter 7, which settles debts quickly, Chapter 13 is about managing them gradually.
Key differences
The primary difference between the two types of bankruptcy is how debt is managed. Chapter 7 focuses on discharge and is faster to complete, while Chapter 13 focuses on repayment through a court-approved plan.
Eligibility is another key difference. Chapter 7 depends heavily on income and the means test, while Chapter 13 requires enough disposable income to fund the repayment plan. The more suitable option will depend on the individual’s income, assets, debt type and financial goals.
For instance, if you need fast relief and qualify under the means test, Chapter 7 may be the better choice for your case. However, if you need more time to catch up on missed payments and want to safeguard your property, Chapter 13 may be the more appropriate one.
You deserve relief from your financial burdens
Bankruptcy is a serious legal process, and choosing the right chapter can have long-term consequences. If you are considering Chapter 7 or Chapter 13 in Maryland, a skilled bankruptcy lawyer can help you understand your rights, evaluate your options and guide you toward the next steps.