Once you realize that your debts are more than you can handle, you may decide that you need to file for bankruptcy. This doesn’t automatically do away with all the debts you have. Instead, you will have to determine if you’re eligible to file Chapter 7 or Chapter 13 bankruptcy. While these serve the same purpose, they’re different.
A Chapter 7 bankruptcy is also known as a liquidation bankruptcy because the trustee may liquidate certain assets to pay your debts. A Chapter 13 bankruptcy is known as a wage earner’s bankruptcy because you’ll make payments on the debts, but some assets may also be liquidated to pay off debts.
Not all assets can be seized
Filing for bankruptcy doesn’t mean that you’ll automatically lose all the assets you’ve worked for. Instead, there are specific assets that are considered exempt, which means you will keep them even if you file bankruptcy.
In Maryland, you can choose between state exemptions or federal exemptions. It’s important consider the specific assets on each list, as well as the cap on each one. You can’t pick and choose exemptions from each list. Instead, you have to choose either state or federal as a whole.
Some of the more common exemptions that are available include specific insurance funds, retirement accounts or public benefits. There are also homestead exemptions that cover the equity available in the home you live in up to a certain monetary amount. Personal property and wildcard exemptions are also possible, and these are based on the as-is value instead of the purchase price.
If you’re considering filing for bankruptcy, it’s beneficial to seek assistance from someone who can help you sort through the exemptions. In some cases, you may find out that the available assets won’t make a big enough difference for them to be worth the trustee liquidating.