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Bankruptcy: Maryland

Filing bankruptcy in Maryland aims to achieve two things.  First, it gives honest debtors a chance to overcome crushing debt, and second creditors may be repaid to the extent that the debtor’s property value or earnings permit. 29,275 bankruptcies were filed in Maryland in 2010, ranking Maryland 21st in the country for the number of bankruptcy filings per capita. 75% of Maryland’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Maryland

Federal law governs bankruptcy proceedings in Maryland, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in Baltimore, Greenbelt, LaPlata and Salisbury.  Although federal courts have jurisdiction over bankruptcy proceedings, Maryland law prohibits petitioners from choosing exemptions found in the U.S. bankruptcy code, permitting only the exemptions provided under Maryland law. With the counsel of a bankruptcy attorney Maryland debtors can fully understand what personal property the exemptions permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, Maryland

Chapter 7 bankruptcies in Maryland are the most common bankruptcy filing.  Chapter 7 is best suited to petitioners without significant assets such as investments or substantial equity in a home, for the reason that a Bankruptcy Trustee may liquidate personal property that isn’t protected by Maryland’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. Maryland’s Chapter 7 bankruptcy law allows debtors to keep some essential property and the exempt assets are strictly off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Maryland Bankruptcy Exemptions

Maryland bankruptcy law designates specific property exemptions allowing petitioners to keep certain personal property and assets so bankruptcy proceedings do not leave them entirely destitute.  In real terms, this means creditors cannot force debtors to sell the shirt off their backs to repay debts owed.  Bankruptcy in Maryland permits petitioners to choose exemptions only from the state list.

Property exemption amounts are subject to change; individuals and couples considering bankruptcy protection should sit down with a Maryland bankruptcy attorney to discuss the options and exemptions open to them.  Maryland bankruptcy exemptions include:

Maryland Homestead Exemption

  • $21,625 total: Owner-occupied residential property (Husband and wife may not double)

Maryland Tenancy by Entirety Exemption

  • Property held as tenancy by the entirety is exempt against debts owed by only one spouse. Includes property transferred in a trust.

Maryland Personal Property Exemption

  • $1000 total: Appliances, furnishings, household goods, books, pets and clothing
  • Health aids
  • Lost future earnings recoveries
  • Perpetual care trust funds
  • Prepaid college trust funds
  • Burial plot

Maryland Tools of the Trade Exemption

  • $5,000 total: Clothing, books, tools, instruments and appliances

Maryland Wage Garnishment Exemption

  • 75% or $145 per week: Earned but unpaid wages
  • 75% or 30 times federal minimum hourly wage (whichever is greater): in Kent, Caroline, & Queen Anne’s of Worcester Counties

Maryland Public Benefits Exemption

  • General assistance
  • Workers’ and Unemployment compensation
  • Baltimore Police death benefits Crime victims’ compensation
  • Crime victims’ compensation

Maryland Insurance Exemption

  • $145 per week or 75% of disposable wages: Medical insurance benefits deducted from wages plus medical insurance payments
  • Disability or health benefits, including court awards, arbitrations and settlements
  • Fraternal benefit society benefits
  • Life insurance or annuity contract proceeds or avails if beneficiary is insured’s dependent, child or spouse

Maryland Pensions and Retirement Savings Exemption

  • ERISA-qualified benefits, IRAs (limited to tax-deductible contributions for non-Roth IRAs)
  • State employees

Maryland Miscellaneous Exemption

  • Alimony to the same extent wages are exempt
  • Child support

Maryland Wild Card Exemption

  • $6,000 total: Cash or any property; must claim exemption within 30 days of levy or attachment
  • $5,000 total: Any personal property

Chapter 13 Bankruptcy, Maryland

In 2010, 25% of petitioners filed for protection under Chapter 13 bankruptcy in Maryland.  Filing Chapter 13 bankruptcy in Maryland begins a financial restructuring process whereby a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan, using the debtor’s future earnings to pay back creditors.  Chapter 13 petitioners in Maryland keep most – or all – of their property.

How to File Bankruptcy in Maryland

A key consideration when deciding whether to pursue bankruptcy protection should be one’s eligibility for property exemptions. In order for bankruptcy to solve one’s financial troubles, the end result should protect major assets and discharge debts. Because each bankruptcy case is uniquely complicated, a Maryland bankruptcy attorney can advise debtors of their financial options concerning Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: Maryland

It is the bankruptcy petitioner’s responsibility to know their rights and duties as debtors.  A Maryland bankruptcy attorney can simplify the particulars of federal bankruptcy laws and state exemptions.  Debtors facing the complex and stressful road to personal bankruptcy will benefit from sitting down with a Maryland bankruptcy attorney for legal counsel and support.