Debt collection notices may pile up in a Maryland mailbox, and collection agency phone calls might prove too much to bear. Laws establishing procedures for filing Chapter 7 and 13 exist to help financially troubled persons achieve a restart. Not everyone knows the difference between Chapter 7 and 13, but the distinctions are stark.
Chapter 7 vs. Chapter 13
Bankruptcy can help individuals get out from underneath debt, but creditors have rights as well. Therefore, bankruptcy laws intend to serve the best interest of all parties involved. With Chapter 7 bankruptcy, the law promotes asset liquidation to pay creditors, excluding exempted items.
With Chapter 7 bankruptcy, debts not paid after the liquidation may face a discharge, meaning the debtor no longer has obligations to pay. However, not all debts are legally dischargeable, and responsibilities such as child support won’t undergo discharges.
Not everyone qualifies for Chapter 7, and anyone who fails a means test would likely seek protection under Chapter 13. With Chapter 13, the debtor agrees to a payment plan to repay a portion of the debts owed. Some debts end up discharged, but the payment plan becomes the central focus of the process.
The value of bankruptcy protections
Bankruptcy delivers particular benefits to those approved. For one, collection action must stop. Freedom from debt collector harassment could reduce a great deal of stress that someone undergoes. Bankruptcy could also stop evictions and foreclosures, taking serious worries off the person’s shoulders.
When payment plans and other arrangements do not work, filing for bankruptcy could be the one viable option left. Individuals struggling with debts may wish to look closer at Chapter 7 and 13 protections.