When it comes to serious financial problems, it’s a good idea to try to stay calm and explore all available options to get things back on track. The good news is that most financial crises are temporary. However, it’s also true that a solution that works for one Maryland resident might not even be a viable option for another. No two financial situations are exactly the same.
It’s important to know where to seek support if you’re facing financial problems that you feel ill-equipped to handle on your own. Contrary to the stigma that often exists, bankruptcy is often a good choice to obtain immediate debt relief and lay the groundwork for a stronger financial future. Chapter 7 and Chapter 13 are the most common types. You must be eligible to apply, so it pays to learn as much as you can about each program to determine which one best fits your needs.
One bankruptcy is not like the other
Both Chapter 7 and Chapter 13 bankruptcy can help you get out of debt. Whether you have a credit card balance you can’t pay, are unable to meet your mortgage obligations or have mounting medical bills because of an injury or illness, these programs may be able to help you resolve your financial problems. The following list shows specific differences between the two types and why you may qualify for one but not the other:
- Chapter 7 typically requires complete liquidation of assets. The sale of your property provides the funds needed to pay off your debts.
- If you have suffered a job loss or your income is below a certain level, you might be eligible for Chapter 7 bankruptcy.
- On the other hand, if you earn more than a certain amount of income, you would not qualify for Chapter 7 application but may still be eligible for Chapter 13.
- Chapter 13 may allow you to retain ownership of your home, vehicle or other major asset.
- People often refer to Chapter 13 as “the working man’s bankruptcy” because you must have reliable income and available funds to continue making payments toward your debts.
- Your lenders must agree to a new payment plan when you apply for Chapter 13.
You may have certain debts that you cannot discharge through either type of bankruptcy. Such debts might include child support payments or personal injury compensation that the court has ordered you to pay. To determine whether your income meets eligibility requirements, you must take a means test, which compares your income to the average household income in Maryland.
Keeping the whole picture in mind
You might hesitate to apply for Chapter 7 or Chapter 13 bankruptcy because you think it will ruin your credit rating forever or that you will never be able to purchase a home or obtain new credit cards if your credit report shows a bankruptcy. While bankruptcy does remain on your credit report, it is temporary.
Bankruptcy can fulfill an immediate financial need and can also pave the way toward restored financial stability down the line. A first logical step to take to determine if such options are right for you is to speak to someone who is well-versed in bankruptcy laws and Maryland debt relief regulations.