Bankruptcy Exemptions in Maryland
Filing for bankruptcy in Maryland proceeds in the same way as other bankruptcy cases throughout the United States since bankruptcy generally is controlled by federal law. The main exception relates to which property of the debtor is protected in bankruptcy, and that is determined by Maryland state law. The locations for filing bankruptcy generally are determined by the federal court district in which the debtor resides.
Chapter 7 Bankruptcy in Maryland: Exemptions
Persons filing bankruptcy in Maryland have a right to protect some property but are limited to selecting from the state law schedule. The most important Maryland bankruptcy law exemptions are as follows:
$1,000 of the value of household goods such as clothing, furniture, appliances, books, and pets. As a practical matter, trustees in Maryland never ask for the turnover of any of the debtor’s clothing (unless you have one of Elvis’ original scarves) or furniture (unless you have valuable antiques that can easily be sold and converted to cash). Unless you breed and sell animals for a living, the trustee will not be interested in Fido, either.
Unlimited amount payable for sickness, accident, injury or death, including compensation for future earnings. This is a broad exemption. Typically bankruptcy lawyers in Maryland use it to protect pending personal injury claims of the debtor.
Federally-qualified retirement plans, such as 401Ks. This exemption comes from Maryland law, as well as applicable federal law.
IRAs (up to a maximum of $1,171,650). This exemption comes from applicable federal law.
$5,000 of the value of clothing, tools, books , and other equipment used in a trade or profession. This exemption is intended to aid self-employed persons continue to earn a living with the tools they need.
$6,000 of the value of any property, if claimed within 30 days of attachment or levy. This a “wild card” used to protect any property that is not specifically described above, generally cash or cash-equivalents such as tax refunds, stock and bonds, accounts receivables, life insurance with cash value, etc.
$5,000 of real estate or any personal property (only for a debtor in bankruptcy and who is domiciled in the state of Maryland). This exemption, and the one above, often are used together to protect the home and belongings of the typical debtor, including cars. The exemption is applicable to the equity (profit) in the car. If the loan on the car exceeds its value, it’s “underwater” and will be of no interest to a trustee in Maryland. If, on the other hand, the value of the car, and other property, exceeds the value of the loans (also known as the “unencumbered value” or “unprotected equity”), there is another tactic available. With the consent of the trustee, the debtor can offer to “buy the equity” – pay the trustee the amount of unprotected equity and, in that way, keep the vehicle. Of course, to keep the car, you also must continue to pay the lender’s loan on the car if it’s financed, and probably reaffirm the debt.
Property held as a “joint tenancy by the entirety” is protected from the debts of one of the spouses. This exemption generally is used to protect equity in the marital home. If there is equity in the home, you need to be very careful and work closely with your bankruptcy attorney to plan your use of the exemption. There can be risks. For example, if you have any joint debts with your spouse, the house can be taken by the trustee and sold to pay that debt off.
NOTE: The Maryland bankruptcy exemptions list above is NOT complete. It includes only the most common exemptions. There are traps for the unwary. For example, under the new bankruptcy law you must qualify to use the exemptions of the state in which you reside, generally it’s a two-year residency minimum. Another example of a potential hazard is selling or transferring property shortly before the filing. The transaction can be reversed by the trustee and can also result in the court denying you a discharge of your debts. Once a Chapter 7 bankruptcy case is filed, you can dismiss the case only with the approval of the judge who, generally, will not permit dismissal if he or she finds you have property that can be sold to pay creditors. Consult only experienced Maryland bankruptcy lawyers to plan your specific case and to learn about the Chapter 7 exemptions in Maryland.
Chapter 13 Bankruptcy in Maryland: Exemptions
When filing for Chapter 13 bankruptcy in Maryland, bankruptcy exemptions are of less concern. So long as the debtor proposes to make total installment payments in the Chapter 13 plan equivalent to what creditors would have obtained in a liquidation of all of the debtor’s unprotected property in a Chapter 7 bankruptcy, the debtor’s property is fully protected.
Bankruptcy Court For Suburban Maryland
In suburban Maryland, where this bankruptcy law firm files cases, the federal bankruptcy court that covers residents of the counties of Calvert, Charles, Prince George’s, Montgomery and St. Mary’s is as follows:
U.S. Bankruptcy Court
District of Maryland
6500 Cherrywood Lane
Greenbelt, MD 20770