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There are many common misunderstandings about bankruptcy. One of the biggest misunderstandings is the idea that everyone who files for bankruptcy will automatically lose their home, their car, and all of their assets and belongings.
This is simply not true. It is true that some types of bankruptcy involve the liquidation of some assets, in some cases. This happens in order to pay a portion of the debt that is owed to your debtors. However, bankruptcy law includes exemptions, or things that cannot be touched when assets are liquidated. In a good number of Chapter 7 bankruptcy cases, especially among people with less income and less assets, filers are able to keep most or all of their assets and possessions. Bankruptcy is primarily a tool for a financial fresh start, not a punishment. The end goal is ultimately financial freedom, and the laws around bankruptcy reflect that.
Maryland lets people choose to use either federal exemptions or—if you have lived in Maryland for at least two years—state exemptions. Maryland’s exemptions include:
Some other exemptions have qualifiers, and some are based in how much equity you have in a given property or asset. When you make a secured purchase with a loan, equity refers to the difference between what you owe on the loan and what the property is currently worth. For example, if you owe $150,000 on a mortgage, and your home is currently worth $200,000, you have $50,000 of equity.
Exemptions with stipulations include:
In general, it is very possible to go through Chapter 7 Bankruptcy in Maryland without losing any property. However, each case requires careful evaluation of assets, as well as skillful, knowledgeable, and sometimes creative application of Maryland and federal bankruptcy exemption policies. This is extremely difficult to do on one’s own, which makes it is essential to at least consult with a reputable bankruptcy attorney. This isn’t the only thing a bankruptcy attorney can help with: they are also invaluable when it comes to the rest of the process, and can prevent potentially devastating mistakes that are unfortunately common among self-represented filers.
Are you thinking of filing for Chapter 7 Bankruptcy in Bethesda, MD, or the Montgomery County area? Attorney Jillian Kindlund has years of experience with Maryland bankruptcy laws, and as well as the legal knowledge and tenacity to get the best possible outcomes for her clients. Don’t wait. Call (240) 539-9393 for a free, personalized consultation today.
In these cases, a trained legal guide can make all the difference. They know how to position you legally so that you can keep the most stuff that is most important to you.
In a chapter 7 case, you can keep all property which the law says is “exempt” from the claims of creditors. Maryland exemptions provides list of the exemptions available for Maryland. In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth now. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement. You also only need to look at your actual equity in any property. This means that you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you count your exemptions against the $10,000 which is your equity if you sell it. While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind on payments. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy. (see Maryland Chapter 7 Bankruptcy or Maryland Chapter 13 Bankruptcy? and Maryland Non-Dischargeable Debts)
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. (see Maryland bankruptcy exemptions) Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13. However, some of your creditors may have a “security interest” in your home, automobile or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case. There are several ways that you can keep collateral or mortgaged property after you file bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.
Yes. Many people believe they cannot own anything for a period of time after filing for bankruptcy. This is not true. You can keep your exempt property and anything you obtain after the bankruptcy is filed. However, if you receive an inheritance, a property settlement, or life insurance benefits within 180 days after your bankruptcy, that money or property may have to be paid to your creditors if the property or money is not exempt. You can also keep any property covered by Maryland bankruptcy exemptions through the bankruptcy.