Chapter 7 Bankruptcy in Maryland: What You Need to Know

One of the original 13 colonies, Maryland is a mid-Atlantic state blessed with a wide variety of landscapes that has earned it the nickname “America in Miniature.” Sand dunes, marshlands, gentle hills, pine groves, and waterways decorate this small state. Perhaps Maryland is best known for the Chesapeake Bay and delicious seafood, but it is also home to the National Aquarium and Maryland Science Center.

Maryland is a wealthy state with a diverse economy. In 2016, its per capita personal income (PCPI) was $57,936, sixth in the United States and 117% of the national average of $49,571. The PCPI increased 3% from 2015 to 2016, compared to the national change of 2.9%. Maryland’s current-dollar GDP for 2016 was $378.3 billion, the 15th highest in the United States. In 2016, Maryland real GDP increased 1.3% compared to the national change of 1.5%. The largest industry in Maryland is finance, insurance, real estate, rental, and leasing, followed by government.

Maryland does not have a high rate of bankruptcies, but of course people file bankruptcy here as in every state of the Union. Let’s look at some specifics of filing for bankruptcy in Maryland.

The Basics of Chapter 7 Bankruptcy in Maryland

When you file for bankruptcy, you do so in federal bankruptcy court; bankruptcy is a federal action governed by Title 11 of the U.S. Code. As an individual, you may file a Chapter 7 bankruptcy for liquidation or a Chapter 13 bankruptcy for reorganization.

Many more individuals file under Chapter 7 than file under Chapter 13. When you file bankruptcy, federal law provides a list of property that is exempted from sale by the bankruptcy trustee. The rest of your property the trustee can sell to help pay your debt.

States may also provide an exemption list that is different from the federal list. Some states allow you to choose whether you want to use the federal list or the state list of bankruptcy exemptions, but not pick and choose items from both. Other states, such as Maryland, insist that you use the state list of exemptions. You may, however, also use federal non-bankruptcy exemptions such as those that affect veterans’ benefits.

Maryland Bankruptcy Exemptions: What property can I keep?

It is vitally important that you understand what you can exempt; your Maryland bankruptcy attorney can guide you through this. Many exemptions provide a dollar limit. That is, you can take an exemption but only up to the amount of a certain dollar figure that you have in equity in the property.

Following are some common Maryland exemptions. Your attorney can discuss a complete list and the details for each exemption. In general, married couples filing a joint bankruptcy are each entitled to their own exemptions, which has the effect of doubling exemptions on a piece of property. But there are exceptions.

Maryland Bankruptcy Exemptions

Homestead

You can take up to a $23,675 exemption in your residence, whether a house, a condominium, or a trailer under Cts. & Jud. Proc. § 11-504(f)(1)(i)(2) and Real Prop § 8-203(d)(3)(ii)). Note that married couples may not double the Maryland homestead exemption.

Example: If you bought a house for $200,000 but you only have $23,675 or less in equity, your house is safe from the bankruptcy trustee. If you have over $23,675 equity in the house, the bankruptcy trustee may sell it. As a practical matter, your equity must be enough over $23,675 to make the sale worthwhile.

Personal Property

You can exempt a number of items of personal property. These include but are not limited to:

• Wearing apparel, books, tools, instruments, or appliances up to a value of $5,000 in value necessary for the practice of your trade or profession. Cts. & Jud. Proc. § 11-504(b)(1))
• Professionally prescribed health aids. Cts. & Jud. Proc. § 11-504(b)(3)
• Household furnishings and goods, clothing, pets, books, and other items for personal or family use up to $1,000. Cts. & Jud. Proc. § 11-504(b)(4)
• Burial plot. Bus. Reg. § 5-503

Motor Vehicle

There is no motor vehicle exemption in Maryland, but you could use your wildcard exemption for up to $6,000 to save your car from the bankruptcy trustee.

Wages

Earned but unpaid wages have exemptions that vary according to county. In Caroline, Kent, Queen Anne’s and Worcester counties, the exemption is the greater of 75% of actual wages or 30 times the federal minimum wage. For other counties, the exemption is the greater of 75% or $145 per week. There are medical deductions that impact these figures. Com. Law §15-601.1

Insurance, Benefit, Support and Court Awards

• Court-ordered child support payments. Cts. & Jud. Proc. § 11-504(b)(60)
• Alimony in an amount equal to your earnings exemption. Cts. & Jud. Proc. § 11-504(b)(7) and Com. Law § 15-601.1
• Public assistance benefits. Human Serv. § 5-407(a)(1), (2)
• Disability or health benefits, including court awards, arbitration awards, and settlements. Cts. & Jud. Proc. § 11-504(b)(2)
• Fraternal benefit society benefits. Ins. § 8-431, Est. & Trusts § 8-115
• Life insurance or annuity contract proceeds when the beneficiary is the insured’s dependent, child, or spouse. Ins. § 816-111(a)
• Settlements or awards that you receive for injury or illness or wrongful death; awards for lost future earnings. Cts. & Jud. Proc. § 11-504(b)(2)

Benefits and Pension/Retirement

Retirement plans are generally exempt as named in Cts. & Jud. Proc. § 11–504(h).

Wildcard

Maryland provides a wildcard exemption of $6,000 that may be used for any cash or property. However, it must be claimed within 30 days of attachment or levy. Cts. & Jud. Proc. 11-504(b)(5).

Where are the Maryland bankruptcy courts located?

If you are considering bankruptcy, speak with an experienced Maryland bankruptcy attorney. The earlier you consult with an attorney, the more options they can present to you short of bankruptcy. But should you move forward with bankruptcy, your lawyer can explain the Maryland exemptions in depth and help you to protect as many of your assets as possible.

Here are the locations of the Maryland bankruptcy courts:

• Baltimore Division: Garmatz Federal Courthouse, 101 W. Lombard St., Suite 8530, Baltimore, MD 21201, Phone: (410) 962-2688
• Greenbelt Division: Federal Courthouse, 6500 Cherrywood Lane, Suite 300, Greenbelt, MD 20770, Phone: (301) 344-8018
• Salisbury (hearings only): Salisbury Courthouse, U.S. Post Office Building, 129 Main St., Room 104, Salisbury, MD 21801