Many people across Maryland struggle to stay on top of their finances, so if you find yourself facing similar circumstances, you are not alone. After considering your options, you may decide that filing for bankruptcy might give you your strongest chance of digging yourself out of debt. Most consumer bankruptcies involve either Chapter 7 or Chapter 13 filings.
According to U.S. News and World Report, the two common types of consumer bankruptcies differ in several key ways.
The Chapter 7 bankruptcy
A Chapter 7 filing may suit your needs if you have a relatively low household income and no realistic way to otherwise get back on top of your finances. You have to take a means test to qualify for Chapter 7. If you pass the test, you move forward with a “liquidation” bankruptcy. This means you may, depending on circumstances, have to sell off some of your property or assets to pay back creditors.
The Chapter 13 bankruptcy
A Chapter 13 bankruptcy might be a better fit if you have some income coming in and do not want to risk having to turn over your home, car or other assets to pay back creditors. When you file for Chapter 13, you typically agree to a new payback plan that involves paying back at least some of your outstanding debt. How much you may have to pay back is impossible to say and varies based on the specifics of your situation.
Often, bankruptcy filers who qualify for Chapter 7 filings opt for this route because they typically take less time to complete. However, there are also some advantages that come with making a Chapter 13 filing.