CHAPTER BY CHAPTER---
WHICH ONE'S BEST FOR YOU?

One thing about bankruptcy that confuses many consumers is the number of Chapters of the Bankruptcy Code from which to choose. Although there are several possibilities, most consumers work with their attorneys to choose between only two choices – Chapter 7 and Chapter 13.

Chapter 7 bankruptcy (also called a "straight bankruptcy" or a "liquidation") is the simplest way to a fresh start, and it is the most popular. Technically, the debtor's assets are to be taken and sold so that the proceeds can be distributed to the debtor's creditors.

In practice, however, many debtors do not lose any of their property for two reasons: 
1) If you have no equity in property it has no value and has no value and will not be taken from you.
2) Many important exemptions exist to protect consumers.  The most important exemptions for most Maryland consumers are the following:

• homes (many married people may keep their homes even if they have substantial equity)
• retirement and pension funds
• $5,000 of tools of the trade
• personal injury awards, payable to the extent for pain and suffering
• $1,000 in household goods
• $11,00 of any other property
• Note: Exemptions are different in D.C. & Maryland

While there are limitations to these exemptions, many consumers are able to keep all of their belongings while reducing or eliminating their debt. You should be aware, however, that certain debts such as tax bills less than three years old (from the due date), child support, or alimony cannot be eliminated by filing bankruptcy. Also, in most cases, student loans are not dischargeable.

Chapter 13 bankruptcy (also called a "repayment plan") is generally used for individuals that have excess money left over after paying their monthly bills, whose income exceeds certain guidelines, or for people who are behind on mortgage or car payments.  It also can help people who have debts that would not be exempt in a Chapter 7. It also can help people who have debts that would not be discharged in Chapter 7. With a repayment plan, the consumer makes payments to a Trustee, who distributes the money to the creditors according to a Chapter 13 plan. The payments can continue for upwards of five years.

A Chapter 13 plan is based on the consumer's monthly income, monthly expenses, debt, and property. Depending on these factors, consumers who qualify pay back either part or all of their debts. As long as Chapter 13 consumers keep up with the plan, they are able to keep their property.

BOTH A CHAPTER 7 AND CHAPTER 13 BANKRUPTCY WILL PUT A STOP TO ANY CREDITOR HARASSMENT, LAWSUIT, WAGE GARNISHMENT, OR FORECLOSURE.

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Wampler, Souder & Sessing, L.L.C. is experienced in helping you eliminate your debt.  Contact us now for a free initial consultation at 301-881-8895 in Rockville, Maryland or at 301-736-5432 in Upper Marlboro, Maryland or at 301-662-5709 in Frederick, Maryland.

If you would like help in deciding whether filing for Bankruptcy is the right course for you, visit the Bankruptcy Info Sheet.

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