To deal with debt, many people struggle until they file for bankruptcy. Bankruptcy offers many protections, but it does not protect all your assets. In fact, you may be ordered to give up certain assets, especially if you file for Chapter 7 bankruptcy.
Unfortunately, you may have to give up your car, home, or other valued possessions unless you can find a way to protect them in bankruptcy. Here are some things you can do to protect your assets.
Use Exemptions
This is huge. Each state allows for certain exemptions so that those filing for bankruptcy can keep certain assets. In Maryland, exemptions can be used for:
- Homestead. Up to $25,150 of equity can be used for any owner-occupied real estate. This includes a house, condominium, or manufactured home.
- Personal property. You are given an exemption of $5,000 for tools you need for your trade. Thus includes uniforms and tools, but not motor vehicles. Prescribed health aids are an unlimited exemption. You get a $1,000 exemption for household furniture and goods, which include furniture, appliances, books, clothing, stereo equipment, and even pets. You also get a wildcard amount of $5,000, which can be used for anything not exempt except real estate. You can use it for motor vehicles, as Maryland offers no exemption for them.
- Earnings. Wages, child support, and alimony are all exempt.
Use Your Cash
If you have a lot of cash on hand, it could be taken in bankruptcy. To avoid this, you should use it wisely. You can use the extra cash to:
- Pay down your mortgage.
- Contribute to retirement accounts.
- Purchase necessary household goods or a vehicle (within exemption limits).
Just keep in mind that purchases made before a bankruptcy filing will be scrutinized, so be prepared to explain what you bought and why.
Avoid Using Retirement Accounts
Most retirement accounts are also exempt in Maryland. The state allows you to keep state employees’ retirement accounts and benefits, as well as any ERISA-qualified benefits and IRAs. Therefore, you should avoid using them to pay off debt. Avoid withdrawing money or else your funds could become vulnerable during bankruptcy.
Keep Personal and Business Assets Separate
If you own a business, now is the time to improve your recordkeeping. Take the extra time to go through all your assets and expenses and keep them separated based on personal vs. business. This will prevent complications down the line when bankruptcy trustees and lawyers are trying to figure out what is exempt and what is not.
Contact Us Today
Bankruptcy is a huge step. It is not something you should take lightly. Be sure to prepare as much as you can.
The Law Offices of Adam M. Freiman can advise you of the steps you need to take and how to get through the process with ease. Schedule a consultation today by calling (410) 486-3500 or filling out the online form.
