Some people refuse to consider bankruptcy because they worry about losing their home, car, or personal belongings, but filing doesn’t mean you’ll lose everything. The truth is, bankruptcy laws include protections that can let you keep certain assets.
What are bankruptcy exemptions?
Bankruptcy exemptions refer to laws that protect specific types of property from creditors. Maryland does not let you use federal bankruptcy exemptions, so you must follow the ones the state provides.
If you file for Chapter 7, exemptions let you keep certain assets instead of giving them up to pay debts. Since the court can only sell property that doesn’t fall under an exemption, most people keep everything they own.
If you file for Chapter 13, exemptions reduce the amount you must repay over time. This arrangement lowers the total debt you must repay, making monthly payments easier.
What are Maryland’s bankruptcy exemptions?
In Maryland, you can use the “wildcard exemption” to protect up to $6,000 in personal property, such as furniture, electronics, or money in your bank account. You can also shield up to $5,000 worth of tools that you use for work.
Maryland protects equity in your home as well. If you own real estate where you live, you can shield up to $25,150 of equity in your home. Equity equals the value of your home minus what you still owe on the mortgage. If you own the home with your spouse, you may qualify for an even larger exemption under the tenancy by the entirety rule.
You can also keep your vehicle in many cases. Maryland lets you protect up to $6,000 of equity in one motor vehicle. If your car’s value falls under that amount after subtracting the loan, you can keep it.
You can also protect personal items such as clothing, household goods, and medical devices. Retirement accounts like 401(k)s and IRAs stay safe, along with life insurance policies and public benefits like Social Security and veterans’ payments.
Bankruptcy doesn’t signal the end of your financial journey. Instead, it offers a structured opportunity to reset your finances and regain control of your life. Maryland’s exemptions let you hold on to the things that matter most while you build a stronger financial future.
