When facing bankruptcy in Maryland, knowing what qualifies as exemptions to safeguard your assets can help. The choice between Chapter 7 and Chapter 13 bankruptcy significantly impacts exempted property.
If you are struggling financially but worrying if you will lose your home or car, learning about exemptions in Maryland may ease your mind.
Chapter 7 vs. Chapter 13
In Chapter 7, courts may sell non-exempt assets to repay creditors, potentially affecting your property. However, Maryland’s generous exemptions, such as those for homestead and motor vehicles, often allow individuals to retain essential assets.
Chapter 13, on the other hand, involves creating a repayment plan, enabling you to keep your property while gradually settling debts.
If you are able to make regular monthly payments to settle your debts, choosing Chapter 13 can eliminate the worry about losing assets and is probably the better option.
In Maryland, the homestead exemption allows you to shield up to a certain amount of equity in your primary residence from the bankruptcy process. The equity limit adjusts periodically, so it is essential to stay informed about the current figures.
Motor vehicle exemption
This exemption permits you to protect a specific amount of equity in your car. You can calculate your equity by subtracting any outstanding loans or liens on the vehicle from its current market value.
Wildcard property exemptions
Personal property, including household goods, clothing and appliances, is also subject to exemptions. Maryland provides a wildcard exemption, allowing you to protect a certain dollar amount of any property you choose, such as additional equity in your home, car or any other valuable possessions.
Tools of the trade exemption
Maryland recognizes a tools of the trade exemption for those whose livelihood relies on specific tools or equipment. This allows you to protect tools, books, instruments or other implements of your trade or profession up to a certain value.
Maryland law also includes a wage exemption, protecting a portion of your earnings from seizure during bankruptcy. This exemption aims to ensure that individuals can maintain a reasonable standard of living even when undergoing the bankruptcy process.
State vs. federal exemptions
Unlike some states that allow a choice between state and federal exemptions, Maryland mandates adherence to its specific set of exemptions. However, individuals filing for bankruptcy in Maryland can claim federal nonbankruptcy exemptions; defined by federal law, these include specific categories such as Social Security benefits, veterans’ benefits and certain pension funds.
While bankruptcy can be a complex process, being aware of the protections offered by these exemptions can provide a measure of relief and help you make informed decisions about your financial future.