January 26, 2017
People who file for bankruptcy in Maryland are often able to keep most—if not all—of their assets. Maryland lists the property that residents can protect in exemption statutes.
Protecting Property in Bankruptcy
Every state, including Maryland, has a list of the property that its residents can protect (exempt) in bankruptcy. Some states allow residents to choose between the state exemptions and the federal exemption scheme, but Maryland doesn’t do so. Even though you’ll have to use Maryland’s exemptions, you can supplement the state list with the federal “nonbankruptcy” exemptions.
The Process: Filling Out the Official Form
Failing to follow the right procedures to claim your exemptions can result in losing property that you would otherwise be able to keep. The most important step is to list all exempt assets on Schedule C: The Property You Claim as Exempt. Anything that isn’t covered by an exemption is called “nonexempt” property.
The bankruptcy trustee—the person who manages your case—is tasked with selling your nonexempt property in a Chapter 7 case and distributing the funds to creditors. In a Chapter 13 case, you can keep everything that you own as long as you have enough income to pay the value of your nonexempt property to your creditors in your three- to five-year repayment plan.
(Find out the pros and cons of each chapter in Choosing the Type of Bankruptcy: Chapter 7 or 13.)
Maryland Property Exemptions
You’ll find the exemptions most commonly used in Maryland below (as of January 2017). Spouses filing jointly (together) can double most exemption amounts.
Be aware that other exemptions might be available to you. Also, the amount and availability of an exemption can change, and many exemptions are subject to conditions beyond the scope of this article. You’ll want to independently review your exemptions or consult with a local bankruptcy lawyer.
Unless otherwise noted, references are to the Code of Maryland (Md. Code Ann.). You’ll find the statutory text on the General Assembly of Maryland website.
You’ll use the homestead exemption to protect a certain amount of equity in your primary residence. If the exemption does not adequately safeguard the property equity, the Chapter 7 trustee will sell the home, return the exemption amount to you, pay off any outstanding secured loans, and distribute the balance to creditors. To keep a home in a Chapter 13 matter, you’ll have to pay for the nonexempt portion through your plan.
- Homestead—$23,675 of equity in owner-occupied residential real estate (spouses cannot double the exemption). This figure follows the federal homestead exemption amount and is scheduled to change April 1, 2019. (Cts. & Jud. Proc. § 11-504(f)(1)(i)(2))
Spouses who hold their residence as tenants by the entirety might be able to protect more equity than afforded by the homestead exemption. For instance, the equity cannot be used to pay off a debt owed by one spouse—it is available for debts owed by both spouses only.
Given the complicated nature of this rule, it’s prudent to seek advice from a local bankruptcy attorney.
Wages and Support
- Earnings—75% of disposable earnings or $145 per week, whichever is greater, plus medical payments deducted by an employer; for county residents of Caroline, Kent, Queen Anne’s or Worcester, 75% of disposable earnings or 30 times the federal minimum wage, whichever is greater, plus medical payments deducted by an employer. (Com. Law § 15-601.1)
- Court-ordered child support payments (Cts. & Jud. Proc. § 11-504(b)(6))
- Alimony—a filer can exempt alimony to the same extent as earnings. (Cts. & Jud. Proc. § 11-504(b)(7)
- None—a filer can use the personal property or wildcard exemption to protect a motor vehicle.
Household Furnishings, Jewelry, and Clothing
- Household goods and personal items—$1,000 worth of household items (including furnishings), clothing, books, and pets. (Cts. & Jud. Proc. § 11-504(b)(4))
- Personal property—$5,000 worth of property other than real estate. (Cts. & Jud. Proc. § 11-504(f)(1)(i)(1))
Tools of the Trade
- Tools of the trade—$5,000 worth of tools and equipment necessary for a trade or profession. (Cts. & Jud. Proc. § 11-504(b)(1))
Retirement Accounts, Pensions, and Other Benefits
- Public assistance (Human Serv. § 5-407(a)(1), (2))
- Qualified retirement plan (Cts. & Jud. Proc. § 11-504(h))
- Unemployment benefits (Lab. & Empl. § 8-106)
- Workers’ compensation benefits (Lab. & Empl. § 9-732)
- State employee pension (State Pers. & Pens. § 21-502)
- Fraternal society benefits (Ins. § 8-431, Est. & Trusts § 8-115)
- Life insurance proceeds paid to a dependent (Ins. § 16-111(a))
- Burial plot or crypt (Bus. Reg. § 5-503)
- Specific partnership property (Corps. & Ass’ns § 9A-502)
- Victim compensation awards (Crim. Proc. § 11-816)
- Compensation payable due to death, sickness, accident, or injury (Cts. & Jud. Proc. § 11-504(b)(2))
- Prescribed health aids (Cts. & Jud. Proc. § 11-504(b)(3))
- Joint bank account with spouse (Cts. & Jud. Proc. § 11-603)
- Security deposit (Real Prop. § 8-203(d)(3)(ii))
- Wildcard—$6,000 worth of any cash or property of the filer’s choosing; must elect to exempt the items within 30 days of a levy or attachment. (Cts. & Jud. Proc. § 11-504(b)(5))
Questions for Your Attorney
- Will filing for bankruptcy be in my best interest?
- Is it prudent to file for bankruptcy if I stand to lose property?
- Can I sell some of my property before I file for bankruptcy?