Choosing Between a Chapter 7 or Chapter 13 Bankruptcy

 Posted on October 06, 2026 in Chapter 13 Bankruptcy

The choice between Chapter 7 and Chapter 13 bankruptcy often comes down to whether your income qualifies you for Chapter 7, and whether you need to protect something a Chapter 7 case cannot save. Neither one is better in the abstract. If you are weighing your options in 2026, a Prince George's County, MD bankruptcy lawyer can tell you which chapter actually fits your situation.

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 bankruptcy is a liquidation case. A trustee reviews your assets and may sell property that is not protected by exemptions. In many consumer cases, exemptions protect everything the filer owns. A Chapter 7 discharge is often entered about four months after filing, although the case itself may stay open longer if assets need to be administered.

Chapter 13 is a reorganization. You keep your property and make payments under a court-approved plan that usually lasts three to five years. The trustee distributes those payments to creditors according to bankruptcy rules. After you complete the plan, qualifying remaining debts can be discharged, although some debts survive Chapter 13.

The practical difference is that Chapter 7 is usually faster. But Chapter 13 gives you tools for handling problems like mortgage arrears and property that might otherwise be at risk.

Do You Qualify for Chapter 7 Bankruptcy?

Eligibility for Chapter 7 often involves the means test under 11 U.S.C. § 707. The test helps determine whether filing under Chapter 7 would be considered an abuse.

The first step compares your household income over the previous six months to the Maryland median for a household of your size. If your income falls below the applicable median, the means-test presumption of abuse does not arise. If your income is above the median, the test continues. You deduct certain allowed expenses and other amounts to determine whether a presumption of abuse applies.

The test uses income from the six months before filing, so a recent job loss may not be fully reflected right away. The means test also generally applies only when your debts are primarily consumer debts.

When Does Chapter 13 Bankruptcy Make More Sense Than Chapter 7?

Chapter 13 is the better choice in several situations, and most of them involve protecting something:

• Behind on a mortgage and wanting to stop a foreclosure while catching up on arrears
• Behind on a car loan and needing time to make up missed payments
• The Chapter 7 means test shows a presumption of abuse
• Equity in a home or other property above what exemptions protect
• Tax debt or support arrears that cannot be discharged and must be paid
• A co-signer you want to shield from collection
• A previous Chapter 7 discharge too recent to allow another

The mortgage situation is the most common by far. Chapter 7 stops a foreclosure temporarily, but it does nothing about the payments you missed. Chapter 13 lets you pay those arrears over the life of the plan while making your regular payment going forward. This can help you save your home from foreclosure.

Will You Lose Your Property in Either Chapter or Chapter 13 Bankruptcy?

Many people keep all of their property in both Chapter 7 and Chapter 13. However, that depends on how much equity they have and which exemptions apply. Under Md. Code, Courts and Judicial Proceedings § 11-504, Maryland uses its own exemption system rather than the federal bankruptcy exemptions.

Maryland exemptions can protect equity in an owner-occupied home, certain household and personal property, tools used for work, retirement accounts, and additional property under general exemptions. Those general exemptions may also be used to protect some vehicle equity.

Chapter 13 handles excess equity differently. Rather than surrendering property, you generally must pay unsecured creditors at least what they would have received in a Chapter 7 liquidation. Understanding what property you need to protect can help determine which type of bankruptcy makes the most sense for you.

Schedule a Free Consultation With Our Greenbelt, MD Bankruptcy Attorney

Attorney Donald Bell has more than 20 years of experience and works with clients directly rather than handing files to staff. His practice places particular focus on saving homes, which is often the reason someone sits down to consider bankruptcy in the first place. That emphasis shapes the chapter analysis, because the right answer for a homeowner behind on a mortgage frequently differs from what a means test alone would suggest.

Contact The Law Office of Donald L. Bell at 301-614-0535 to talk to our Prince George's County, MD bankruptcy lawyer today.