What Happens to Your Debt After Bankruptcy in Maryland?
Bankruptcy can be a complex process, and its effects on debt can vary significantly depending on the specific circumstances and the type of bankruptcy filed. In Maryland, understanding what happens to your debt after bankruptcy is crucial for those considering this option as a means to regain financial stability.
Types of Bankruptcy in Maryland
In Maryland, individuals typically file for either Chapter 7 or Chapter 13 bankruptcy. Each type has different implications for debts.
Chapter 7 Bankruptcy
Chapter 7 bankruptcy is a liquidation process where most unsecured debts, such as credit card debt and medical bills, can be discharged. Once you file for Chapter 7, an automatic stay goes into effect, stopping collection efforts and lawsuits from creditors. After the bankruptcy process is complete, which usually takes about three to six months, you can expect the following:
- Discharged Debts: Most unsecured debts will be eliminated, releasing you from the legal obligation to pay them.
- Secured Debts: If you wish to keep any secured items (like a house or car), you will need to continue making payments on those debts unless you surrender the items.
- Non-Dischargeable Debts: Certain types of debts, such as student loans, alimony, child support, and some tax debts, cannot be discharged in Chapter 7 bankruptcy.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, on the other hand, is known as a reorganization bankruptcy. It allows individuals with regular income to develop a plan to repay all or part of their debts over a three to five-year period. Here’s what happens to your debt in Chapter 13:
- Debt Repayment Plan: You will propose a repayment plan detailing how you will repay your creditors over a specified term.
- Protection from Creditors: Like Chapter 7, an automatic stay applies, which protects you from collection actions during the bankruptcy process.
- Discharge of Remaining Debts: Upon successful completion of your repayment plan, any remaining eligible debts may be discharged.
- Secured Debts: You can possibly keep secured property if you keep up with the payments outlined in your repayment plan.
The Impact on Credit Reports
Both Chapter 7 and Chapter 13 bankruptcies will impact your credit score and will remain on your credit report for up to ten years (Chapter 7) or seven years (Chapter 13). This information can significantly affect your ability to obtain new credit, but it may also provide a fresh start.
Aftermath and Moving Forward
After bankruptcy, it is essential to focus on rebuilding your financial life. Establishing a budget, monitoring your credit report, and seeking financial counseling can help create a more stable future. Additionally, obtaining new credit responsibly can rebuild your score over time.
Consulting a Bankruptcy Attorney
Understanding your unique situation is critical when considering bankruptcy. Consulting with a qualified bankruptcy attorney in Maryland can provide personalized guidance based on the specifics of your case. They can help clarify what will happen to your debts after bankruptcy, assist you in navigating the process, and ensure that your rights are protected.
In conclusion, while bankruptcy can significantly impact your debts and credit, it also offers a path towards financial recovery. Knowing what to expect can help you make informed decisions and take control of your financial future.