If you’re considering bankruptcy in Maryland, you’re probably asking:
“Will I lose my home, my car, or everything I own?”
The good news is that Maryland law provides important protections for many essential assets. But Maryland’s exemption system has some unique rules — and understanding them is critical before filing.
Here’s what you need to know.
Maryland Requires Use of State Exemptions
If you have lived in Maryland for at least 730 days (2 years) before filing bankruptcy, you must use Maryland’s state exemptions. Maryland does not allow most residents to choose the federal exemption system.
Because you cannot opt into federal exemptions, careful planning is especially important.
Maryland Homestead Exemption
Maryland provides a homestead exemption that protects equity in your primary residence.
🏠 Homestead Protection
Maryland protects up to approximately $25,000 in equity in your home (this amount may adjust periodically).
If you file jointly with a spouse who also owns the property, you may be able to double the exemption.
Example:
- Home value: $350,000
- Mortgage balance: $330,000
- Equity: $20,000
Your $20,000 equity would be fully protected under the homestead exemption.
If you have significantly more equity, Chapter 13 may be a safer option than Chapter 7.
Maryland Wildcard Exemption
Maryland provides a “wildcard” exemption that allows you to protect:
- Up to $6,000 in cash or property of your choice
This wildcard exemption is flexible and can be applied to:
- Bank accounts
- Tax refunds
- Vehicles
- Personal property
Strategic use of the wildcard exemption is often critical in Maryland cases.
Maryland Motor Vehicle Exemption
Maryland protects:
- Up to $5,000 in vehicle equity
If you are married and filing jointly, exemptions may be doubled if both spouses have an ownership interest.
Remember: exemptions protect equity, not total vehicle value.
Example:
- Car value: $18,000
- Loan balance: $14,000
- Equity: $4,000
The $4,000 equity would fall within the vehicle exemption.
Personal Property Exemptions
Maryland protects certain essential personal property, including:
- Wearing apparel
- Household goods (subject to limits)
- Tools of the trade (up to a specified amount)
- Health aids
Maryland’s personal property exemptions are more limited than some states, so asset review is important before filing.
Retirement Accounts Are Protected
Most retirement accounts are protected under federal law, including:
- 401(k)s
- IRAs (subject to federal caps)
- Pensions
- Profit-sharing plans
Retirement savings are generally safe in bankruptcy.
Public Benefits Protection
Maryland protects many public benefits, including:
- Social Security
- Disability benefits
- Unemployment compensation
- Workers’ compensation
How Exemptions Work in Chapter 7
In Chapter 7 bankruptcy:
- A trustee may sell non-exempt property.
- Exempt property is protected.
- Many consumer cases are “no-asset” cases.
However, because Maryland’s homestead exemption is modest compared to some states, homeowners with higher equity must evaluate their options carefully.
How Exemptions Work in Chapter 13
In Chapter 13:
- You keep your property.
- You enter a 3–5 year repayment plan.
- The value of non-exempt property affects how much you must repay unsecured creditors.
Chapter 13 is often used when home equity exceeds exemption limits.
Important Rules to Know
1. Residency Requirement
You must have lived in Maryland for at least 730 days before filing to use Maryland exemptions. If you recently moved, special look-back rules may apply.
2. Exemptions Protect Equity — Not Total Value
Exemptions apply only to your equity.
Example:
- Home value: $400,000
- Mortgage: $350,000
- Equity: $50,000
Only the $50,000 equity matters for exemption purposes.
3. Do Not Transfer Property Before Filing
Transferring assets before bankruptcy can result in serious consequences, including denial of discharge.
Is Bankruptcy Right for You?
Bankruptcy can:
- Stop foreclosure
- Stop wage garnishment
- Stop repossession
- Eliminate credit card debt
- Eliminate medical debt
- Provide a financial reset
But Maryland’s exemption system requires careful strategy.
Speak With an Experienced Bankruptcy Attorney
The right bankruptcy strategy depends on:
- Your home equity
- Your vehicle equity
- Your bank balances
- Your tax refunds
- Your long-term financial goals
Before filing, make sure you understand exactly what property is protected.
If you are overwhelmed by debt in Maryland, schedule a consultation to review your options and protect what matters most.
