Bankruptcy is generally seen as a “this-for-that” sort of financial solution. You get rid of pieces of your debt through discharges but you also could lose unprotected assets and pieces of property. For so many people who file for bankruptcy, there are two assets that are more important than any others: vehicles and homes.
If you stand to lose your car through your bankruptcy filing, getting to work might become impossible; in turn, your income dries up and you find yourself in greater debt. If you stand to lose your home through bankruptcy, affording a new residence may present an even larger challenge. But if you could hold onto both your home and your car, you would still be all right, despite the bankruptcy filing. So, is there a way to protect your car from repossession and your home from foreclosure?
Using State or Federal Exemptions
When you file for personal bankruptcy – whether you need Chapter 7 or Chapter 13 – you might be able to use a list of state or federal exemptions to protect your property, depending on your unique financial situation. Exemptions essentially allow you to hold onto particular assets, no matter how much you owe or how little of your debt is actually discharged.
Maryland does not have an exemption specific for motor vehicles, but you can use the state’s wildcard exemption towards your car. The wildcard exemption lets you protect a vehicle – or other property – that is valued at $6,000 or less. A vehicle can also sometimes be removed from a bankruptcy estate if the bankruptcy filer owes more than it is worth, or if there have been very few payments made thus far. Keep in mind that if you do get to keep your car, you will still need to meet regular payment requirements on it, despite the successful bankruptcy.
Keeping your home after bankruptcy, especially a Chapter 7 filing, can prove to be an uphill battle, but it is not unwinnable. Maryland’s homestead exemption only protects up to $22,975 of equity on property that you use as your primary residence. Married couples also do not get a doubled homestead exemption in Maryland. If your equity is too high or you actually own your home completely, it will be more likely to be seized during bankruptcy to offset discharged debts.
Planning Ahead is Your Greatest Tool
People tend to lose more property during bankruptcy when they enter it blindly. Planning ahead and working with a trusted bankruptcy lawyer is crucial if you want to do everything you can to have your bankruptcy go as smoothly as possible. Contact Belsky, Weinberg & Horowitz LLC and our bankruptcy attorneys in Baltimore if you think bankruptcy is in your future but you are worried about what will happen to your home or car.