Choosing Between a Chapter 7 or Chapter 13 Bankruptcy

 Posted on April 17, 2025 in Chapter 13 Bankruptcy

For the average person, Chapter 7 and Chapter 13 are the most likely bankruptcy options when looking for debt relief. As you navigate your choices, knowing about the pros and cons of both will help you make an informed decision about your financial future. If you have questions or concerns, a Prince George’s County, MD bankruptcy attorney can offer advice rooted in experience.

Definitions of Chapter 7 and Chapter 13 Bankruptcy

Chapter 7 bankruptcy is commonly called liquidation bankruptcy because it allows you to give up property to pay debts while protecting certain assets. For example, some Chapter 7 exemptions include qualified retirement plans and social security benefits. People often wonder if they can keep their home, and in many cases, they can. Exemptions typically include protections for home equity.

Chapter 13 bankruptcy is more of a plan designed to help you pay off your debts in smaller amounts. The terms include an end date, and when it concludes, the debt that remains is wiped away.

Pros and Cons of Chapter 7 Bankruptcy

Filing for Chapter 7 bankruptcy comes with several advantages, including:

• Debts are typically cleared quickly, usually within six months.

• There is no payment plan requirement.

• Wage garnishment, debt lawsuits, and creditor harassment fall under an automatic stay as soon as you file.

• Debt liquidation is diverse, often wiping out credit cards and medical debt.

Unfortunately, filing for Chapter 7 will impact your credit score and could result in losing some valuable property. Other disadvantages include the income-to-debt ratio requirements and the fact that some debts, such as student loans and taxes, cannot be included. Additionally, when you file for Chapter 7, it becomes public information.

Pros and Cons of Chapter 13 Bankruptcy

Some advantages of Chapter 13 bankruptcy to consider are:

• It can stop foreclosure on your home, allowing you to catch up on mortgage payments.

• You can keep some property while you work on a way to pay for it.

• Domestic support payments, like child support and alimony, can be included.

• It allows you to settle debts with smaller payments for things like rent, personal loans, and old utility bills.

• You can request the dismissal of your case at any time.

A major con is that Chapter 13 agreements expect you to use any extra money you might have to pay debts. If your income increases, your payments may increase as well, and the timeframe is long compared to the fast-track debt relief that comes with Chapter 7 bankruptcy.

Contact a Greenbelt, MD Bankruptcy Attorney for a Free Consultation

Deciding between a Chapter 7 and Chapter 13 bankruptcy is a big decision that can impact your mental and financial wellness. With over 20 years of hands-on experience, I understand the relief bankruptcy can offer and recognize the circumstances that best suit the available options. Call 301-614-0535 to schedule a free consultation with a Prince George’s County, MD bankruptcy lawyer who cares.