Understanding automatic bankruptcy exemptions in Maryland

When a Maryland resident first considers filing a bankruptcy petition, one of the first questions that is asked is whether all personal assets will be sacrificed in the bankruptcy proceeding. The simple answer is “No,” but the complete answer can be far more complex.

The federal bankruptcy statute identifies certain assets that are exempt from the claims of creditors in a bankruptcy proceeding. Maryland law also identifies certain assets that are exempt from the claims of creditors. These assets are usually referred to as automatic exemptions, but the two lists are not identical.

Exempt assets under Maryland law include the following:

  • Wearing apparel, books, tools, instruments and appliances so long as the total amount does not exceed $5,000 if they are used in a trade or profession
  • Proceeds paid or to be paid in cash for sickness, injury or death
  • Health aids
  • The debtor’s interest in household furnishings in an amount not exceed $1,000
  • Money paid or payable for child support or alimony
  • Up to $6,000 in other cash or property (this is known as the “wild card exemption”)

Maryland’s schedule of exemptions closely follows the exemptions available under federal law, but the schedules are not identical. The amount that can be declared exempt for a debtor’s residence is $15,000 for a single debtor or $25,150 for a married couple. Certain retirement and profit sharing plans are also exempt under both plans, but eligibility periods and maximum amounts may differ depending upon the debtor’s marital and financial situation.

Perhaps the most important fact about the two schedules is that they are mutually exclusive that is, a person can choose either list but cannot mix and match exemptions from both lists. For this reason, anyone contemplating bankruptcy may wish to review the two lists of exemptions with an experienced bankruptcy attorney to ensure that the more advantageous list is selected.