Throughout the first two quarters of 2010, Maryland debtors and businesses have filed nearly 16,000 bankruptcies. And, continuing a trend that has lasted for several years now, more debtors have filed for bankruptcy than the quarter before. While, nationwide, most consumer debtors opt for a Chapter 7 bankruptcy versus a Chapter 13 one (approximately 75% choose Chapter 7), in Maryland, the breakdown is closer to fifty-fifty, with just slightly more choosing Chapter 7.
A Chapter 7 bankruptcy is a liquidation bankruptcy. The debtor’s bankruptcy trustee takes control of any property of the debtor that is non-exempt and will sell that property and use the cash to pay off the debtor’s creditors. A Chapter 13 bankruptcy is a reorganization bankruptcy. Debtors filing under Chapter 13 work out a repayment plan to pay off their debts in three to five years. If you would like to learn more about whether a Chapter 7< or Chapter 13 bankruptcy is right for you, a Maryland bankruptcy lawyer can provide you with the expert guidance you need.
Choosing Between Chapter 7 and Chapter 13
The following details highlight important distinctions between Chapter 7 and Chapter 13 bankruptcies. Read and discuss them with an experienced bankruptcy attorney to determine what your best choice should be:
- Because a Chapter 13 bankruptcy does not liquidate your assets, it is a good option for people who have non-exempt property that they would like to keep. Otherwise, in a Chapter 7 bankruptcy, the bankruptcy trustee will take control of and sell all non-exempt property.
- Many people opt for a Chapter 7 bankruptcy when they face overwhelming medical expenses (typically medically expenses account for around half of all bankruptcies each year), prolonged unemployment or too much credit.
- A Chapter 13 bankruptcy should only be an option for people with a stable income and an ability to adhere to a strict financial plan over the next several years.Chapter 13 filers should have a stable job and work history.
- Chapter 7 bankruptcies are much quicker than Chapter 13 ones. The former can have a debtor making a fresh start in several months, whereas Chapter 13 bankruptcies require a repayment plan lasting up to five years. For some people, three to five years of continued financial hardship is too much of a burden.
- Chapter 13 bankruptcy filers have control over their property and repaying their debt during the reorganization and repayment. Whereas, in a Chapter 7bankruptcy, a trustee will take control of a debtor’s assets and attempt to sell them at a reasonable price, a Chapter 13 filer can retain and sell property as he or she sees fit to best manage the repayment of the debt.
- If there is a business involved, a Chapter 7 bankruptcy ends business operations. Under a Chapter 13 bankruptcy, the business can continue to operate, albeit under stricter standards and oversight.
- It will likely be easier to obtain re-financing on a large item such as a home, for instance, under a Chapter 13 bankruptcy. A creditor will be more likely to work with the debtor if the debtor has successfully recognized his or her debts and made payments under the Chapter 13 repayment plan for a period of time.