Maryland Bankruptcy Law: Can You Keep Your Car?

Bankruptcy can be a daunting process, especially for individuals concerned about losing their essential assets. In Maryland, as with many states, understanding bankruptcy laws is crucial for protecting your property. One common question many filers have is, "Can I keep my car?" In this article, we dive into Maryland bankruptcy law and explore how it affects vehicle ownership.

When filing for bankruptcy in Maryland, you generally have two primary options: Chapter 7 and Chapter 13 bankruptcy. Each option has different implications for asset retention, particularly for your vehicle.

Chapter 7 Bankruptcy

Chapter 7 bankruptcy is often referred to as "liquidation" bankruptcy. In this type, the bankruptcy trustee may sell non-exempt assets to pay off creditors. However, Maryland has specific exemption laws that can help you keep your car.

In Maryland, the vehicle exemption allows you to protect one vehicle valued up to $8,000. If your vehicle is worth less than this amount, you can keep it without any issues. If the value exceeds $8,000, you may have to consider alternatives, such as exempting other assets or repaying part of the debt.

It’s essential to understand that if you are current on your vehicle payments, you can maintain possession of the car even in Chapter 7 bankruptcy. However, if behind on payments, the lender has the right to repossess the vehicle unless you catch up on your payments or make arrangements to reaffirm the debt.

Chapter 13 Bankruptcy

Chapter 13 bankruptcy operates differently than Chapter 7. This type of bankruptcy is designed for individuals with a regular income who want to repay their debts over time, typically three to five years. One significant advantage of Chapter 13 is that it allows you to keep your car and other assets, even if they exceed the exemption limits.

Under Chapter 13, you can propose a repayment plan that includes your vehicle loan. If you're behind on your payments, you can get caught up through the plan. This provision makes Chapter 13 a popular choice for individuals wanting to save their vehicles while managing debt obligations effectively.

Reaffirmation Agreements

Regardless of whether you file for Chapter 7 or Chapter 13, reaffirmation agreements may be an option. A reaffirmation agreement is a written promise to continue making payments on a debt, allowing you to keep the asset, like your car. This agreement must be filed with the bankruptcy court and can help prevent repossession after your bankruptcy case is discharged.

Consulting with a Bankruptcy Attorney

Navigating the complexities of bankruptcy law can be overwhelming, and each case is unique. To ensure you make informed decisions about your vehicle and other assets, it is highly advisable to consult with a knowledgeable bankruptcy attorney. They can provide tailored advice based on your financial situation and help you understand your options.

Conclusion

In summary, under Maryland bankruptcy law, it is often possible to keep your car whether you file for Chapter 7 or Chapter 13 bankruptcy. Your ability to retain your vehicle largely depends on its value and the payments status. Understanding the implications of bankruptcy can significantly impact your financial future, so seeking professional guidance is a critical step in the process.