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Which chapter of bankruptcy is best for your situation?

On Behalf of | Dec 22, 2022 | Bankruptcy Law

Consumers may find themselves facing difficult financial circumstances for a variety of reasons. Due to events including serious medical events, unexpected job loss and more, you may be unable to manage your daily needs and long-term financial expectations. As a result, you might be behind on your payments, and eventually, you could be in a place where you are not certain you could catch up on your own.

You may feel as if you will never escape your current financial circumstances, but there could be a way out. Through consumer bankruptcy, you might find a way to deal with your debt and regain your footing. The two most common chapters of bankruptcy are Chapter 7 and Chapter 13, and there are various factors that will determine which of these two is best for your individual situation.

Liquidation versus reorganization

The right bankruptcy choice for you depends on the details of your financial circumstances, such as the type of debt you have and your income. Chapter 7 and Chapter 13 bankruptcy deal with debt in different ways, but either one offers Maryland consumers the opportunity to have a better and stronger financial future. The differences between these two options include:

  • Chapter 7 bankruptcy – This is a liquidation bankruptcy. It does require the liquidation of certain assets, but there are exemptions available that will allow you to keep much of your property. Chapter 7 bankruptcy takes three to five months to complete, and your disposable income cannot be over a certain amount in order to qualify.
  • Chapter 13 bankruptcy – This is a reorganization bankruptcy. Chapter 13 reorganizes your debt into manageable payments that you will make according to the terms of your bankruptcy plan. This is ideal for those with a significant amount of secured debt, and it typically takes a period of three to five years to complete.

To find out if you are eligible for Chapter 7, you will have to complete a means test. If you do not qualify, you have the option to file for Chapter 13.

Your best financial future

Bankruptcy may not seem like an ideal option, but it could be the right choice for your financial future. Through this legal process, you can have protection from creditors and debt collectors, and you can deal with certain types of balances once and for all. You may benefit from an understanding of how bankruptcy would work in your specific situation.