People who find themselves struggling with their debt situation might consider filing for bankruptcy. Those unable to file for Chapter 7 may consider filing for Chapter 13 bankruptcy in Maryland. Understanding basic points about Chapter 13 might help debtors prepare for a possible filing.
Chapter 13 vs. Chapter 7
Bankruptcy – Chapter 7 & 13 – provides a potential way for debtors to get a handle on their debt situation and seek a fresh start. However, significant differences exist between the two. Chapter 7 focuses on liquidation and passing a means test based on various financial factors. Those who cannot pass the means test may file for Chapter 13, which involves proposing a payment plan.
A payment plan allows a debtor to propose a fair repayment plan to creditors. The debtor repays all or some of the debt via monthly payments for three to five years. Creditors could have a say during the bankruptcy proceedings, but the court makes all final decisions on whether to approve or deny the proposed plan.
Points about Chapter 13
Some debts could face discharge in Chapter 13 bankruptcy proceedings. Certain unsecured debts, such as unsecured credit, may undergo discharges. Once a debt undergoes a discharge ruling, the debtor has no obligation to pay anymore.
Some debts cannot undergo a discharge, and debtors should expect to continue paying child support and specific taxes owed. Persons required to pay damages because of a fatal DUI incident would not receive a reprieve.
Once the court approves a Chapter 13 payment plan, the debtor must make all required payments. Failing to make payments could lead to bankruptcy dismissal actions. Anyone who runs into trouble making payments may need to contact the bankruptcy trustee and inform them of the situation.