Should I File for Chapter 7 or Chapter 13 in Maryland?

 Posted on June 30, 2025 in Uncategorized

The first step towards bankruptcy is making the decision that it is time to explore your options. Choosing the right chapter is the next step. In Maryland, most people file under either Chapter 7 or Chapter 13 of the U.S. Bankruptcy Code. Each option serves a different purpose and comes with its own set of rules. The right choice depends on your income, assets, and long-term goals.

An approachable, community-based Prince George’s County, MD bankruptcy lawyer can help you understand your options and guide you toward financial relief with compassion and clarity.

What Is the Difference Between Chapter 7 and Chapter 13 Bankruptcy?

Chapter 7 is often called "liquidation" bankruptcy. It allows you to wipe out many types of unsecured debt, such as credit cards, personal loans, and medical bills, without a repayment plan. However, you must pass a means test to qualify, and some of your property could be sold to repay creditors.

Chapter 13, by contrast, is a reorganization plan. Instead of wiping out your debts all at once, you propose a three- to five-year repayment plan based on your income. It can help you catch up on mortgage payments, save your home from foreclosure, or pay back taxes over time. Chapter 13 is often a better fit for people with steady income and valuable assets they want to protect.

How Do I Know Which Chapter I Qualify For?

In Maryland, you must pass the federal means test to file Chapter 7. If your household income is above the state median based on your family size, you may be required to file under Chapter 13 instead. For example, as of June 2025, the median income for a family of four in Maryland is about $154,000.

You may also lean toward Chapter 13 if you are behind on your mortgage, have non-dischargeable debts like child support or recent taxes, or want to keep property that would be sold in Chapter 7. A bankruptcy lawyer can run the numbers and help you make an informed decision.

What Can I Keep if I File for Bankruptcy in Maryland?

Maryland has opted out of the federal bankruptcy exemptions, so filers are required to use Maryland’s state-specific exemptions. These exemptions are meant to shield your home equity, car, clothing, household goods, retirement accounts, and tools of the trade – at least up to a certain amount. For example, under Maryland Code, Courts and Judicial Proceedings §11–504, you can keep just over $31,575 in home equity and up to $5,000 in tools you need for your trade. You might use the $6,000 wildcard exemption for your car or some other property you own.

If your assets exceed what can be exempted, Chapter 13 may be the safer route. It allows you to keep your property as long as you make your monthly plan payments.

Will Filing Bankruptcy Affect My Credit and Future Finances?

Both Chapter 7 and Chapter 13 will appear on your credit report. Chapter 7 stays on your report for 10 years, and Chapter 13 for seven years. But for many people, credit begins to improve as soon as debts are discharged or payments begin under a Chapter 13 plan. Filing also stops collection calls, lawsuits, garnishments, and foreclosure proceedings under the automatic stay.

What Else Should I Consider Before Filing for Bankruptcy in Maryland?

• You must complete credit counseling from an approved agency within 180 days before filing.

• You may only receive a discharge under Chapter 7 once every eight years.

• Bankruptcy will not eliminate student loans, most taxes, or domestic support obligations unless very specific circumstances apply.

Contact a Bowie, MD Consumer Bankruptcy Attorney

You deserve a lawyer who understands your situation and what best serves your interests and needs. At Bloc One Services, LLC, our Prince George’s County, MD bankruptcy lawyer offers approachable, honest guidance and a free 30-minute initial consultation. Whether you are considering Chapter 7 or Chapter 13, we will help you make a plan that works for you and your future. Call us today at 240-200-0076.