When you file for a Chapter 7 or Chapter 13 bankruptcy, there are rules as to what assets you can keep. One asset that bankruptcy filers worry about the most is their home. That is why many people avoid bankruptcy. They fear losing their home, especially if they are using Chapter 7 bankruptcy.
You may be happy to know that you may be able to keep your home through what is called a homestead exemption. The homestead exemption protects equity in your residential home. If the homestead exemption covers all of your equity, then the trustee does not have to sell your home in a Chapter 7 bankruptcy. However, if you cannot protect all of your home’s equity, then a Chapter 7 trustee will sell your home and distribute the proceeds to creditors.
How to Keep My Home
Keeping your home in a Chapter 7 bankruptcy is difficult but not impossible. To ensure you do not lose your house in Chapter 7, you will need to be current on your mortgage, protect all the equity with a homestead exemption, and continue making your mortgage payments after bankruptcy.
In a Chapter 13 bankruptcy, you will likely get to keep your home because you will be paying your debts through a repayment plan. You can still exempt at least some of your equity. If you have more equity in your home than what the exemption protects, you will need to make payments on that equity. You will have three to five years to make payments.
Maryland Homestead Exemption
The amount of the homestead exemption depends on the state where you live. A few states do not have a homestead exemption. In these cases, you should be able to use the federal exemptions if they are available. Some states offer a “wildcard exemption,” which will allow you to exempt any property.
In Maryland, the homestead exemption is $25,150. This means you can exempt up to $25,150 in equity in any owner-occupied real estate. This includes a house, condominium, manufactured home, or co-op. This exception is the same whether you are single or married. It does not double if you are married. Maryland does have a wildcard exemption amount of $6,000. The entire portion may be applied to the real estate exemption of $25,150.00, resulting in a maximum residential equity of $31,150.
All exemptions have exclusions that restrict use. For example, in order to claim Maryland exemptions, you must have resided in the state for the last two years.
Contact Us Today
If you are struggling financially, bankruptcy can be a good option. Just make sure you understand what it entails and what exemptions you have so you can keep as much property as possible.
The Law Offices of Adam M. Freiman has 60 years of combined experience. We will assess your financial situation and help you understand your legal options. We will help alleviate the stress that comes with money matters. Schedule a consultation by filling out the online form or calling (410) 486-3500.
