How can exemptions help me in a bankruptcy?

How can exemptions help me in a bankruptcy?

On Behalf of | May 10, 2021 | Uncategorized |

The idea behind a bankruptcy is to give a person a fresh financial start.

While this means that the process should give a Maryland person some relief from debt, a fresh financial start will not mean much if to get it, a family gets left without any property and funds to maintain their standard of living.

This is one reason why Maryland, like other states, allows debtors to use exemptions to protect some of their property in a bankruptcy.

While the topic of exemptions often comes up in a Chapter 7 bankruptcy proceeding, people can use them outside of bankruptcy as well. Likewise, exemptions do play a role in Chapter 13 bankruptcies.

Maryland’s laws exempt certain types of property from collection

Some more common exemptions in Maryland include a homestead exemption, an exemption for retirement plans and a so-called wildcard exemption.

The homestead exemption allows a person to protect just over $25,000 of equity in his or her home.

Marylanders are also able to keep the full value of most standard retirement plans, such as 401(k)s and Individual Retirement Accounts, or IRAs.

Finally, the wildcard exemption allows a person to claim $6,000 in cash or other property of his or her choosing.

For married couples who file, they can effectively double their exemption in many cases. For example, if they both own their family home, the exemption is $50,000.

Debtors should be aware of their rights with respect to exemptions

Generally, those filing bankruptcy will also need to remember that exemptions do not invalidate mortgages and liens. For example, a couple cannot hope to use an exemption to stop the holder of a car lien from repossessing once the bankruptcy case is over.

In order to get the benefit of these exemptions, debtors will have to properly claim them during their bankruptcy proceeding. They can get the help of an experienced bankruptcy attorney when doing this.