Filing for Chapter 7 bankruptcy can feel like a scary step, but it may offer valuable relief for those facing overwhelming debt. Understanding both the benefits and drawbacks of this process in Maryland is essential for making an informed choice.
Debt discharge
One of the most significant benefits of Chapter 7 bankruptcy is the discharge of qualifying debts. Credit card debt, medical bills and personal loans may be wiped out, which lifts a huge financial burden. Chapter 7 provides a financial reset, letting you rebuild without the weight of certain unsecured debts.
Immediate relief from creditors
After filing, an automatic stay goes into effect. This stay halts all collection activities, and it prevents creditors from calling, garnishing wages or pursuing any lawsuits while your case is underway.
Chapter 7 bankruptcy cases typically move quickly. These cases often wrap up within 3 to 6 months, which makes Chapter 7 bankruptcy an efficient way to address financial strain.
Retention of essentials
Maryland law offers exemptions that allow you to keep essential property. This property includes your home, vehicle and personal belongings, as long as they fall within set exemption limits.
Impact on credit
Filing for bankruptcy will affect your credit score and may remain on your credit report for up to 10 years. Following a Chapter 7 filing, securing new credit may be challenging. Creditors may view you as a higher risk, potentially leading to higher interest rates or stricter terms on any credit extended. Though, as time goes on, the negative impact on your credit score decreases.
Loss of non-exempt assets
Any property not protected under Maryland’s exemptions could be sold to repay creditors. This includes assets considered non-essential or luxury items.
Public record
Bankruptcy filings are public records. This means that your case details are accessible to anyone who searches for them, which may feel intrusive for some filers. However, bankruptcy is no longer the blackmark it once was as it has become so common.
Eligibility requirements
Unfortunately, not everyone qualifies for Chapter 7 bankruptcy. Potential filers must pass a means test and prove that their income is low enough to qualify for this type of debt relief.
Even if you file bankruptcy, and a debt is no longer your debt, if a debt has a co-signer, your bankruptcy is not their bankruptcy. Accordingly, if you have any co-signed loans, those co-signers may still be responsible for the debt, even if your portion is discharged.
Chapter 7 bankruptcy can offer Maryland residents an effective debt solution. However, it is essential to weigh these benefits against the potential downsides, such as credit impacts and the loss of non-exempt property. Considering these factors.