There are two basic types of personal bankruptcy proceedings: liquidation under Chapter 7, and debtor rehabilitation involving a court-approved plan of reorganization and payment of the debts over a period of time using future earnings under Chapters 11 and 13.

Chapter 7
Informally called “straight bankruptcy,” Chapter 7 is a liquidation bankruptcy proceeding. The debtor turns over all non-exempt property (assets) to the bankruptcy trustee who then converts it to cash for distribution among the creditors. At the end of the proceeding the debtor receives a discharge of indebtedness (discharge notice) for all dischargeable debts, releasing him or her from personal liability for those debts.

Chapter 11
Also known as ‘Reorganization,’ Chapter 11 is normally the chapter under which businesses file for bankruptcy. This allows the business to continue its operations while repaying creditors concurrently through a court-approved plan of reorganization.

Chapter 13
Also known as ‘Adjustment of Debts of an Individual with Regular Annual Income,’ Chapter 13 provides debt relief for individuals or consumers. Chapter 13 differs from Chapter 7 in the respect that it enables the debtor to keep valuable assets, like a house, while making payments to creditors based on the debtor’s anticipated income over the life of the plan, usually three to five years. At a confirmation hearing, the court either approves or disapproves the plan, depending on whether the plan meets the Bankruptcy Code’s requirements for confirmation. While bankruptcy should always be a last resort, we can help you decide if it is the best available option for you. Contact Behzad Gohari at The Gohari Law Firm, LLC for your Maryland bankruptcy consult by calling (301) 761-3000, or click the contact button below.