Understanding Dischargeable vs. Non-Dischargeable Debt in Maryland Bankruptcy
When faced with overwhelming debt, bankruptcy can offer a fresh start for many individuals. However, understanding the differences between dischargeable and non-dischargeable debts is crucial for anyone considering this financial route, particularly in Maryland.
What is Dischargeable Debt?
Dischargeable debt refers to debts that can be eliminated through bankruptcy proceedings. Once these debts are discharged, the debtor is no longer legally required to pay them. Common types of dischargeable debts include:
- Credit card debt
- Medical bills
- Personal loans
- Some forms of business debt
In Maryland, Chapter 7 and Chapter 13 bankruptcy can help eliminate these types of debts. In Chapter 7, eligible debts are discharged quickly, often within a few months, while Chapter 13 involves a repayment plan over three to five years before discharge.
What is Non-Dischargeable Debt?
Non-dischargeable debt, on the other hand, cannot be eliminated through bankruptcy. Borrowers remain liable for these debts even after filing for bankruptcy. In Maryland, common examples of non-dischargeable debts include:
- Child support and alimony payments
- Most tax debts
- Student loans (unless undue hardship is proven)
- Debts resulting from personal injury claims due to DUI
It is important for individuals to know what debts cannot be discharged as they prepare for bankruptcy proceedings. This knowledge allows for better financial planning and understanding of potential financial responsibilities post-bankruptcy.
How Bankruptcy Affects Debts
When a debtor files for bankruptcy in Maryland, the automatic stay immediately halts all collection activities. This means creditors cannot pursue payments while the bankruptcy process is underway. However, the outcome of whether a debt will be discharged or non-dischargeable varies significantly based on the type of debt and the bankruptcy chapter filed.
Seeking Guidance
Bankruptcy laws can be complex and vary by state. In Maryland, consulting with a specialized bankruptcy attorney can provide valuable insights into the dischargeability of specific debts and help navigate the filing process. An attorney can also ensure that all paperwork is completed correctly to maximize potential debt discharge.
Conclusion
Understanding the distinctions between dischargeable and non-dischargeable debts is essential for anyone considering bankruptcy in Maryland. By recognizing which debts can be eliminated and which will remain, individuals can make informed decisions that influence their financial futures. If you are facing significant debt challenges, take the first step towards financial relief by seeking guidance and exploring your bankruptcy options.