What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

Chapter 7 bankruptcy and Chapter 13 bankruptcy are two different types of bankruptcy available in Maryland. Chapter 7 bankruptcy is commonly referred to as “straight bankruptcy” or “liquidation bankruptcy.” When a person or business chooses Chapter 7 bankruptcy, their debts are usually completely discharged. This means the debtor does not have to pay back anything that they owe. In exchange, a debtor has to give up some assets to pay for their debts. Depending on the value of the assets, this could range from a few items to almost all of them. Chapter 13 bankruptcy is sometimes called “reorganization bankruptcy.” In Chapter 13 bankruptcy, a debtor is able to keep all of their assets, and a court creates a debt payment plan. The debtor will make regular payments to a court-appointed trustee, and the trustee will then distribute the money to those the debtor owes. This payment plan usually lasts 3-5 years, and any remaining debt is discharged at the end of the repayment period. The main difference between the two types of bankruptcy is that Chapter 7 allows a debtor to get rid of their debt more quickly and completely, while Chapter 13 allows a debtor to keep their assets and repay their debt over a period of time. Depending on the situation, one of these options may be more beneficial than the other.

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What is the difference between Chapter 7 bankruptcy and Chapter 13 bankruptcy?

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