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How does Chapter 7 bankruptcy work?

On Behalf of | Jan 13, 2023 | BANKRUPTCY LAW - Bankruptcy

It is common for people in Maryland to have different types of debt. They may have mortgages, car loans, personal loans, credit card debt, medical debt and other forms of debt. Having debt is not necessarily bad either as long as people can make their monthly payments.

Life is unpredictable and sudden changes to people’s lives can occur. Sometimes, they are good changes, but others certainly are not. If people suffer a significant injury, develop a serious illness, lose their job or have other major setbacks, it affects them financially. They may lose income, which means they may not be able to pay their monthly payments on their debt obligations and fall behind.

People may even incur more debt to try and keep up. They quickly can have more debt than they can handle. In these situations, it may seem like there is no way out, but people could file for Chapter 7 bankruptcy and achieve a fresh start.

Basics of Chapter 7 bankruptcy

Chapter 7 bankruptcy allows people to completely discharge many unsecured debts, such as credit cards, medical debts, past due utility bills, personal loans and other unsecured debts. There are certain debts that people cannot discharge, such as child support and alimony arrears, student loan debts, certain judgments based on fraud or willful actions that harm other people, certain tax liens and other debts.

While people do have to liquidate some of their property to satisfy secured debts, they can still keep certain property through the process as well. People are able to keep clothing, furniture and other personal belongings, a vehicle, jewelry, pensions, personal injury awards, tools for their business and other personal property.

Many people in Maryland may be afraid of filing for Chapter 7 bankruptcy due to the damage to their credit, but for many, it can be the best option for being able to start over free of debt. This can be a complicated process and people need to follow all of the laws. It may be helpful to consult with experienced attorneys who understand the bankruptcy process.