If you have outstanding debts you can’t afford to pay, Chapter 7 bankruptcy can help you start over with a clean slate. There are many benefits to filing this chapter, including discharging and managing your debt in a more convenient way. The guide below details Chapter 7 further to help you make the best decision for you. 

Questions About Chapter 7 Answered

What’s the difference between Chapter 7 and Chapter 13?  

With Chapter 7 bankruptcy, unsecured debt, including credit card bills, are completely discharged, usually in just three to six months. However, some of your assets could be repossessed or go into foreclosure.  

With Chapter 13 bankruptcy, on the other hand, your debt will be restructured into a payment plan that lasts between three and five years. You can keep your possessions and secure a lower interest rate with less total money owed compared to the sum of all your current debts.  

Only people who pass a Chapter 7 means test qualify to file for liquidation bankruptcy. Which chapter you use to file also depends on your circumstances—some types of debt, such as overdue mortgage payments, are usually better-suited for Chapter 13 bankruptcy because it protects your belongings from repossession and foreclosure.  

Can I keep my belongings if I file for Chapter 7?  

Yes—some items are exempt from foreclosure and repossession. What’s defined as exempt versus nonexempt property varies by state. In Maryland, for example, up to $25,150 of your home value is protected, as well as $6,000 in any property of your choosing. 

These exemptions ensure you can start fresh after declaring bankruptcy so you can improve your financial standing and keep the belongings that matter most to you. 

What debts won't be discharged when I file for bankruptcy?  

Although a Chapter 7 bankruptcy can absolve you from many different types of debt, there are some exceptions. In Maryland, for example, you’ll continue to owe child support, alimony, taxes, legal fines, and student loans, if any of those charges are levied against you. Additionally, if a creditor files a claim against you for fraud, the court can order you to repay them.  

How do I file for Chapter 7?  

Within 180 days before filing, you must first receive counseling from a qualified nonprofit credit counseling agency before the court considers your case. The agency will describe the advantages and disadvantages of bankruptcy to you and offer recommendations for managing your debt.  

After you receive a certificate of completion, you can schedule a consultation with a bankruptcy attorney for help filing your case. Although you technically don’t need a lawyer to file, legal guidance will ensure all qualified debts are properly discharged.  Do not take this article as legal advice, it is a general overview.  A consult with an experienced attorney would be strongly advised to learn about your options in bankruptcy.  

If you want to talk with a bankruptcy attorney in Baltimore County, MD, contact the Law Offices of Frank E Turney, P.A. Since 1993, the firm has helped people rehabilitate from debt and achieve financial security. To learn more about their services, visit their website or call (410) 788-­8830 to schedule a consultation.