Bankruptcy Laws in Maryland: Can You Eliminate Credit Card Debt?

When dealing with overwhelming financial challenges, many individuals in Maryland consider bankruptcy as a potential solution. One of the common types of debt that individuals hope to eliminate through bankruptcy is credit card debt. Understanding Maryland's bankruptcy laws is essential for anyone evaluating this option.

In Maryland, individuals typically file for bankruptcy under Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Each chapter has distinct implications for credit card debt and different processes. Chapter 7 bankruptcy, often referred to as liquidation bankruptcy, is designed to eliminate unsecured debts like credit card bills quickly. Once the bankruptcy is approved, most credit card debts can be discharged, giving the individual a fresh financial start.

However, to qualify for Chapter 7 bankruptcy in Maryland, individuals must pass a means test. This means they must demonstrate that their income is below a certain threshold, relative to the median income in the state. If an individual's income exceeds this limit, they may be required to file for Chapter 13 bankruptcy instead.

On the other hand, Chapter 13 bankruptcy allows individuals to create a repayment plan to pay off their debts over three to five years. This method can be beneficial for those who have the means to pay back a portion of their debts while also protecting certain assets from liquidation. In many cases, credit card debts can still be significantly reduced under this chapter, depending on the individual's financial situation.

In addition to understanding these bankruptcy types, it's important to know what debts cannot be discharged in bankruptcy. While most credit card debts are eligible for elimination, there are exceptions. For instance, debts incurred through fraudulent activities or made shortly before filing for bankruptcy may not be dischargeable. Additionally, any child support, alimony, and certain tax obligations present a further complication.

Before proceeding with bankruptcy, Maryland residents should also consider the long-term effects on their credit score and financial future. Filing for bankruptcy can lead to a significantly decreased credit score, impacting future borrowing opportunities. It is often advisable to consult with a qualified bankruptcy attorney to explore all available options and ensure that you are making the best decision for your financial circumstances.

In summary, Maryland's bankruptcy laws can indeed provide a pathway to eliminate credit card debt, primarily through Chapter 7 and Chapter 13 filings. However, individuals need to understand the qualifications, processes, and long-term implications associated with bankruptcy. With the right guidance, residents can navigate their financial difficulties effectively and work toward a more stable economic future.