Maryland Bankruptcy Exemptions and Law

For most people, filing bankruptcy is a last resort that can offer a fresh start. It can help with mounting debt and endless calls from creditors. While it’s possible in a Chapter 7 bankruptcy case that you could lose your home and other high-value assets, there are safeguards in place to help keep that from happening. While it’s true that your Chapter 7 bankruptcy trustee may attempt to sell your home to pay off your creditors, there are ways to protect the equity you have in your family’s home.

This article explains the state’s bankruptcy laws, including the bankruptcy exemptions available to you in the District of Maryland. It also shows you how to take advantage of the Maryland homestead exemption.

If you’re debating whether to file a Chapter 7 or Chapter 13 bankruptcy case, contact a Maryland bankruptcy lawyer. They’ll review your financial situation and help you decide if bankruptcy is the best option for you.

Types of Bankruptcy in Maryland

There are two main types of bankruptcy: Chapter 7 (liquidation bankruptcy) and Chapter 13 (reorganization bankruptcy). Which type is best for you depends on your finances and income.

If you’re looking to eliminate your debt and start over, you’ll want to file a Chapter 7 bankruptcy case. If you meet the qualifications, you may have your debt discharged in full or in part. For those seeking a more affordable payment plan, a Chapter 13 bankruptcy case is a better fit. In a Chapter 13 bankruptcy, you will present to the court a three-to-five-year repayment plan that settles your debts with creditors.

The benefit of a Chapter 7 case is that you won’t have to pay your creditors back once the bankruptcy judge discharges your accounts in bankruptcy. The main advantage of a Chapter 13 case is that you will no longer be behind on your bills. You’ll manage to avoid collection action, including possible foreclosure and repossession. Both will have a negative effect on your credit rating, with a Chapter 7 lasting longer and being more severe.

Bankruptcy and the Automatic Stay

The moment the bankruptcy court accepts your bankruptcy petition and assigns it a case number, the automatic stay takes effect. An automatic stay is a court order that prohibits your unsecured and secured creditors from taking any collection action against you.

Section 362 of the Bankruptcy Code immediately stops adverse creditor actions like:

• Foreclosure
• Lien placement
• Repossession
• Wage garnishment
• Bank account levies
• Eviction
• Civil lawsuits

The automatic stay is just one of the protections of the bankruptcy process. Under federal law, creditors cannot attempt to collect or receive payments from debtors in bankruptcy. If a creditor believes that it should be able to proceed with either a foreclosure, repossession, or sheriff’s sale, it can raise this issue at the 341 Meeting of Creditors.

In a Maryland Chapter 13 bankruptcy, a creditor can object if the repayment plan does not treat its debt correctly. The court usually considers that objection during the plan-confirmation process, not in a separate lawsuit.

Creditors may file a separate bankruptcy lawsuit, called an adversary proceeding, to argue that a specific debt should not be discharged. A secured creditor that wants to foreclose or repossess property while the case is pending may ask the court for permission to do so.

What Happens to Your Debts in Bankruptcy?

The reason to file bankruptcy is so that the court will either discharge your debts or approve a long-term repayment plan for your financial obligations. What happens to your debts depends on which type of bankruptcy you file. In most accepted Chapter 7 bankruptcy filings, the court will discharge your debts, and you’ll owe nothing. In a Chapter 13 case, the court approves a three-to-five-year repayment plan in which you pay your secured and unsecured debts either in full or in part.

Let’s take a closer look at what actually happens to your debts.

Debts That Are Dischargeable in Bankruptcy

In general, most or all of your unsecured debt is dischargeable in bankruptcy. In a Chapter 7 case, the judge will discharge the debt. In a Chapter 13 case, you’ll make payments to these creditors during your Chapter 13 plan. Under your repayment plan, the judge may discharge any remaining debts at its conclusion.

The most common types of dischargeable debts include:

• Credit cards
• Medical bills
• Personal loans (with no collateral)
• Past-due utility bills
• Payday loans
• Older tax debts

Unless the unsecured creditor makes a serious objection at the Meeting of Creditors, these debts will more than likely be discharged at the end of your bankruptcy case.

Some Debts Are Not Dischargeable

Some debts are not dischargeable in bankruptcy. These are financial obligations the United States Bankruptcy Court believes you should have to pay regardless of filing bankruptcy. For example, student loans are non-dischargeable debts. You can’t include them in your Chapter 7 bankruptcy, and the trustee will not recommend that the judge discharge them.

Some of the more common debts that are non-dischargeable include the following:

• Alimony
• Child support
• Recent tax debts

The U.S. Bankruptcy Court will not discharge these debts.

Am I Eligible for Bankruptcy in Maryland?

There is no guarantee that the bankruptcy court will accept your bankruptcy petition. You must meet certain eligibility requirements to file a Chapter 7 or Chapter 13 bankruptcy case. These requirements are based on federal law, but each state may add additional requirements as it sees fit.

To qualify for a Chapter 7 bankruptcy in Maryland, your income must be below your state’s median household income. As of 2026, the median incomes for Maryland are as follows:

• One-person household: $86,928
• Two-person household: $114,611
• Three-person household: $135,949
• Four-person household: $166,173

If you earn more than the state’s median income, you can still qualify for Chapter 7 bankruptcy. You must instead demonstrate that your disposable income is below the above thresholds.

Qualifying for a Chapter 13 is a bit more difficult than qualifying for a Chapter 7. To file Chapter 13 under Maryland law, you must have sufficient regular income to commit to your Chapter 13 repayment plan. You must also show that your total debt is below the federal maximum limits. These limits are as follows:

• Unsecured debt: $526,700
• Secured debt: $1,580,125

If your debt(s) are above these amounts, you won’t qualify for Chapter 13 bankruptcy. The trustee may allow you to file a Chapter 7 instead. The rationale behind this is that you won’t be able to make your monthly payments on time, forcing the court to dismiss your case.

It’s a good idea to meet with a Maryland bankruptcy attorney before you file your petition. They’ll let you know if you meet the qualifications and, if necessary, help you amend your petition to the other chapter.

What Is a Bankruptcy Exemption?

If you’ve considered filing bankruptcy, then you probably know that the trustee has the right to sell your assets in order to pay your creditors some or all of the money you owe them. The good news is that Maryland law offers debtors bankruptcy exemptions.

These exemptions allow you to protect some or all of your equity in your real and personal property. The most important exemption is the Maryland homestead exemption. This protects the equity you have in your primary residence. There are also Maryland exemptions for other types of property, such as household items, tools of the trade, and a wildcard exemption applicable to any property of your choice.

Exemptions are something to discuss with an experienced Maryland bankruptcy attorney before you file. It’s important that you know whether you can protect your home and other assets before filing your petition.

Maryland’s Bankruptcy Exemptions

Under Maryland bankruptcy law, you are allowed to exempt certain amounts of equity in your real estate and other property. The exemptions as of 2026 are as follows:

• Home equity: Maryland’s homestead exemption is $125,000. If you have less than $125,000 equity in your home, neither the trustee nor a creditor can touch it. Married couples cannot double the exemption amount in Maryland.
• Personal property: Under Maryland bankruptcy law, you can exempt up to $1,000 in personal property. This includes household items, furniture, appliances, etc.
• Tools of the Trade: Maryland allows you to exempt up to $5,000 for professional tools of the trade, such as tools, equipment, and supplies. You may need to show proof that they’re a necessary part of your profession.
• Motor Vehicle: There’s no separate motor vehicle exemption in Maryland. You may be able to protect the equity in your car under the wildcard exemption.
• Wildcard exemption: Maryland bankruptcy petitioners may protect up to $6,000 in otherwise nonexempt property. Most debtors apply this exemption to motor vehicles and cash in their checking or savings accounts.

When you first meet with a Maryland bankruptcy lawyer, make sure you discuss the exemptions. You must declare your intentions when you file your bankruptcy petition. If you file a Chapter 7, you must complete your “Statement of Intentions” regarding your home and indicate which set of exemptions you plan to claim.

Disclaimer: State laws are subject to change due to new legislation, higher court rulings, and other means. While FindLaw strives to provide the most current information, consult a local bankruptcy attorney to verify your state laws.

Seek Legal Advice From an Attorney Familiar With Maryland’s Bankruptcy Laws

If you’re in over your head with debt and are looking for a fresh start, bankruptcy may be your best option. It’s a good idea to discuss your financial situation with an experienced Maryland bankruptcy attorney. A seasoned bankruptcy lawyer understands that each individual debtor is different and every case is unique.

An experienced local bankruptcy attorney will help guide you through the filing process, represent you in court, and negotiate with creditors to ensure that you retain as many of your assets as the law allows. Having a legal expert on your side improves your chances of a successful bankruptcy petition.