Maryland residents are faced with a choice of what kind of bankruptcy to file when they run into financial difficulties. The two primary types of bankruptcy each offer their own advantages.
Chapter 7 gives you a near-complete debt discharge
Chapter 7 bankruptcy is a complete liquidation. While most types of unsecured debts are discharged in this bankruptcy, the trustee will liquidate your assets to pay your creditors. However, there are protections for some assets, such as your home and retirement accounts. This is often the option that most debtors prefer because their debts will go away. There is a means test that makes Chapter 7 unavailable for people who have incomes above a certain amount.
Chapter 13 buys you time
Chapter 13 bankruptcy is a restructuring, This gives you time and breathing room to pay back debts. You will have a payment plan lasting a certain amount of years. You will not have to liquidate your assets. Many households must file Chapter 13 bankruptcies because they make too much money to qualify for Chapter 7. The flip side is that your credit will not take as much of a hit, provided that you are able to emerge from the bankruptcy having made your payments.
Which one works best depends on your situation. Many people want to get a new start free from debt, but they do not always qualify for it. If you can take advantage of Chapter 7 bankruptcy, this is usually the better option. Either way, filing for bankruptcy can help you out of crushing debt.
