Maryland does not have a homestead exemption
Can you keep your home and file for bankruptcy in Maryland? Maryland bankruptcy laws do not have a homestead exemption similar to most states. In fact, there is no homestead exemption in Maryland and federal bankruptcy exemptions are not available. Despite this fact, there are still ways to protect your home through the bankruptcy process in Maryland. Maryland law does provide for a wildcard exemption that can be used to protect $5,000 of real or personal property.
If you have a modest amount of home equity, the wildcard exemption could shield it as exempt. In addition to the wildcard exemption, Maryland bankruptcy law recognizes the concept of tenancy by the entireties. This legal principle prevents a creditor of only one spouse from attaching joint marital property in satisfaction of a debt. For example, if a wife has incurred credit card debt, in her own name, that has spiraled out of control, her creditors cannot come after the home she owns jointly with her husband.
What are your options?
What to do in the event that you have significant home equity and joint debt? First, confirm that Maryland bankruptcy laws apply to your case. A recent move may impact which state’s exemption laws will apply. If Maryland law does apply, be aware that filing for bankruptcy does not necessarily dictate that your home will be sold by the bankruptcy trustee. In most cases, trustees don’t want to sell your assets. They are often willing to accept cash settlements rather than going through with a liquidation. Through your bankruptcy attorney, an agreement could be reached whereby the trustee would receive payment mirroring the amount of your home equity. This money would then be distributed to your creditors and you could stay in your home. Lastly, if cash is tight and you can’t afford to buy-out the equity in your home, chapter 13 bankruptcy could be an option. Chapter 13 bankruptcy allows for debtors to pay out the value of non-exempt property over a period of years rather than all at once as would be required in a settlement with the trustee. In fact, one of the most common reasons debtors file chapter 13 is to retain assets that they would otherwise lose in a chapter 7 case.
If you are considering filing for bankruptcy and are confused about how your assets will be affected, contact a bankruptcy attorney.