What Happens to Your Property in Maryland Bankruptcy?
When considering bankruptcy in Maryland, one of the most pressing concerns for individuals is the fate of their property. Bankruptcy laws provide a framework for managing your debts, but they also dictate how your assets will be handled during the process. Understanding what happens to your property in Maryland bankruptcy can alleviate some uncertainties and help you make informed decisions.
In Maryland, there are two primary types of personal bankruptcy: Chapter 7 and Chapter 13. Each has distinct implications for your property.
Chapter 7 Bankruptcy
Chapter 7 is often referred to as "liquidation bankruptcy." In this type of bankruptcy, a court-appointed trustee evaluates your assets and may sell non-exempt property to pay off your creditors. However, Maryland law allows individuals to claim certain exemptions to protect specific assets from liquidation.
Exemptions in Maryland include:
- Homestead Exemption: Home equity up to $25,150 is protected, meaning you can keep your home if your equity is below this threshold.
- Personal Property Exemption: Up to $15,000 in personal property, such as clothing, household goods, and other personal effects, is exempt.
- Vehicle Exemption: You can protect up to $6,000 in equity in your vehicle.
- Pension and Retirement Accounts: Most retirement accounts are fully protected from creditors.
It’s crucial to understand that non-exempt assets may be sold to pay creditors. However, many individuals find that their assets fall within exemption limits, allowing them to retain most of their property.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, also known as "reorganization bankruptcy," allows individuals to reorganize their debts and create a payment plan over three to five years. This option is often preferable for those who want to retain their property, including their home and car.
Under Chapter 13, you are required to repay debts according to a court-approved plan, which may reduce the total amount owed. Furthermore, as long as you keep making payments as required, you can keep both exempt and non-exempt property. This is particularly beneficial for those at risk of foreclosure or repossession.
Understanding the Process
Filing for bankruptcy in Maryland requires the completion of a means test and credit counseling. After filing, an automatic stay is enacted that stops most collection actions against you, providing some immediate relief. However, you must be prepared to navigate the legal landscape, including attending a meeting of creditors and complying with court requirements.
Consulting a Qualified Attorney
The complexities of bankruptcy laws and their implications for property can be challenging to navigate. It is advisable to consult a qualified bankruptcy attorney who understands Maryland law to help guide you through the process and assess your situation carefully. An attorney can provide personalized advice about retaining your property and creating a suitable bankruptcy plan for your specific needs.
In conclusion, while bankruptcy can significantly impact your property, understanding the type of bankruptcy you file for and the exemptions available in Maryland is crucial. Whether you choose Chapter 7 or Chapter 13, being well-informed will help you navigate this challenging situation while protecting your assets as much as possible.