Filing for Bankruptcy in Maryland

Filing for bankruptcy in Maryland isn’t much different than filing in another state because the Maryland bankruptcy process falls under federal law. But you'll need to understand Maryland state exemption laws, too.

By , Attorney

Table of Contents

Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to COVID-19 or another event, bankruptcy can help. Here, you'll find:

  • an explanation about Chapters 7 and 13
  • checklists to help you understand the process and stay organized
  • Maryland's property exemption laws and filing information, and
  • links to our bankruptcy quiz, an online qualifying tool, and other helpful resources.

However, we couldn't squeeze everything into this article, so be sure to check out its companion, What You Need to Know to File for Bankruptcy—you'll find lots more details there.

How Bankruptcy Works in Maryland

In most respects, filing for bankruptcy in Maryland isn't any different than filing in another state. The bankruptcy process falls under federal law, not Maryland state law, and it works by unwinding the contracts between you and your creditors—that's what gives you a fresh start.

But Maryland's laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after going over some basics.

Choosing the Right Bankruptcy Chapter For You in Maryland

Most people file either Chapter 7 or Chapter 13. If you don't know the differences between the two, you're not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.

Chapter 7 bankruptcy. Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick—it only takes a few months to complete. And it's cheap—you don't pay anything to creditors. It works well for those whose property consists of the essential items needed to live and work.

People with more assets could lose them, however, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas—even your house or vehicle if you have too much equity in it or you're behind on the payments. Unlike Chapter 13, Chapter 7 doesn't have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind when you file.

Chapter 13 bankruptcy. By contrast, Chapter 13 filers must pay creditors some or all of what they owe using a three- to five-year repayment plan. But the payment plan allows Chapter 13 to offer benefits not available in Chapter 7. For instance, not only do you keep all of your property, but you can save your home from foreclosure or your car from repossession. If you need time to repay a debt you can't discharge in bankruptcy, you can use this chapter to force a creditor into a payment plan. The biggest downside to this chapter? It can be expensive. Many people can't afford the monthly payment. Learn more about when filing Chapter 13 is better than Chapter 7.

Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.

Will Filing Bankruptcy in Maryland Erase My Debts?

Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a "secured debt"—if you don't pay what you owe, the lender gets to take the property back.)

But you can't discharge all debts. Nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy, and student loans aren't easy to wipe out (you'd have to win a separate lawsuit). You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worth your while.

Steps in a Maryland Bankruptcy

We all know that seeing the forest helps us recognize the trees, so it's probably a good time to consider the significant steps you'll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You've already made headway on the first two items!

Bankruptcy Steps Checklist

Keeping Property When Filing Bankruptcy in Maryland

You won't lose everything in bankruptcy. You'll use your state bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you'll keep in your case.

  • Exempt and nonexempt property. You can keep property protected by an exemption or "exempt" property. When a bankruptcy exemption doesn't cover the property, you'll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
  • Choosing state or federal exemptions. Unlike some other states, you can't choose between the state exemption list and the list of federal bankruptcy exemptions. You must use Maryland's exemptions. But you can use the federal nonbankruptcy exemptions.
  • Doubling exemptions. Spouses filing together can double the exemption amount if both own the property unless noted otherwise.
  • COVID-19 recovery rebate exemption. You might be able to protect stimulus payments, tax credits, and child credits in bankruptcy with the federal recovery rebate exemption.
  • Retirement accounts all filers can protect. You can protect tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,362,800 per person (as of June 2021). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.

Maryland Bankruptcy Exemptions

Here's a list of common Maryland bankruptcy exemptions.

  • Homestead. Up to $25,150 of equity in any owner-occupied real estate (house, condominium, co-op, or permanently affixed manufactured home (married couples cannot double). (Cts. & Jud. Proc. § 11-504(f)(1)(i)(2), Real Prop § 8-203(d)(3)(ii).) Learn more about Maryland's homestead exemption in bankruptcy.
  • Insurance and damages. Disability or health benefits, including court awards, arbitration awards, & settlements (Cts. & Jud. Proc. § 11-504(b)(2)); fraternal benefit society benefits (Ins. § 8-431, Est. & Trusts § 8-115); life insurance or annuity contract proceeds when the beneficiary is the insured's dependent, child, or spouse (Ins. § 816-111(a)).
  • Motor vehicles. Maryland doesn't have a motor vehicle exemption. You can use the wildcard exemption (see below) to protect the equity in your vehicle.
  • Personal injury, wrongful death, lost future earnings awards. (Cts. & Jud. Proc. § 11-504(b)(2).)
  • Personal property. Up to $5,000 in tools needed in your trade, including clothing, books, tools, and inventory (Cts. & Jud. Proc. § 11-504(b)(1)); professionally prescribed health aids (Cts. & Jud. Proc. § 11-504(b)(3)); up to $1,000 in appliances and furnishings, clothing, pets, and books for use by you or your dependents (Cts. & Jud. Proc. § 11-504(b)(4)); $5,000 personal property (Cts. & Jud. Proc. § 11-504(f)(1)(i)(1)); burial plot (Bus. Reg. § 5-503)).
  • Public benefits, earnings, and support. Court-ordered child support payments (Cts. & Jud. Proc. § 11-504(b)(6)); 75% of disposable earnings or $145 per week, whichever is greater (plus medical payments deducted by an employer), or, for residents of Caroline, Kent, Queen Anne's and Worcester counties, 75% of disposable earnings or 30 times the federal minimum wage, whichever is greater (plus medical payments deducted by an employer) (Com. Law § 15-601.1); alimony in an amount equal to your earnings exemption (Cts. & Jud. Proc. § 11-504(b)(7), Com. Law § 15-601.1); public assistance benefits (Human Serv. § 5-407(a)(1),(2)).
  • Retirement benefits. ERISA-qualified benefits and IRAs (Cts. & Jud. Proc. § 11-504(h)); state employees' retirement accounts and benefits (State Pers. & Pens. § 21-502).
  • Wildcard exemptions. Cash or property up to $6,000 in value, plus an additional $5,000 of value in personal property. (Cts. & Jud. Proc. § § 11-504(b)(5), (f)(1)(i)(1).) Find out more about the wildcard exemption.

Maryland's exemption amounts are adjusted periodically. To keep up to date with current figures, check for updates on the General Assembly of Maryland website or consult with a bankruptcy lawyer.

Preventing Bankruptcy Exemption Problems

Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

Qualifying for Bankruptcy in Maryland

If you've never filed for bankruptcy before, you'll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

You'll also need to meet specific chapter qualifications.

You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

Find out more about calculating a Chapter 13 bankruptcy payment.

Hiring a Bankruptcy Lawyer in Maryland

Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:

  • qualify for the chapter of your choice
  • determine when it's time to file
  • help you keep the property you want
  • make sure you don't run afoul of fraud or other issues, and
  • explain when you can stop paying the bills you'll erase in your case.

You can expect creditors to call until you file. It's usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.

Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about the bankruptcy process. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?

Filing Your Bankruptcy in Maryland

Now that you've decided to file, the fun begins! Well, not really. The first step—gathering your financial information—can be a bit of a chore. But using our bankruptcy document checklist should help you organize the things you (or your attorney) will need.

Bankruptcy Document Checklist

Bankruptcy Forms, Means Test Multipliers, and Course Providers

After assembling the documents, your next step will be to prepare the paperwork. Here's what you'll need and where to find it.

  • Bankruptcy forms. You'll find free downloadable bankruptcy forms on the U.S. Courts website.
  • Means test multipliers. Go to the U.S. Trustee website to get the figures needed to complete the means test.
  • Education providers. The U.S. Trustee website also lists providers under "Credit Counseling & Debtor Education." Scroll down until you get to your district. And don't give up—it's a long list. (Individuals must complete credit counseling during the 180 days before filing for bankruptcy and a debt management course after filing the bankruptcy case.)

Maryland Bankruptcy Court Locations

Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. On the Maryland Bankruptcy Court website, you'll find local rules and instructions for filing your paperwork. The Maryland bankruptcy court has three divisions, but only two accept cases for filing. You'll file your bankruptcy case at the courthouse that serves your county.

Baltimore Division

Greenbelt Division

Salisbury Division

Garmatz Federal Courthouse

101 West Lombard Street

Suite 8530

Baltimore, MD 21201

(410) 962-2688

(Anne Arundel, Baltimore City, Baltimore County, Caroline, Carroll, Cecil, Dorchester, Harford, Howard, Kent, Queen Annes, Somerset, Talbot,
Wicomico, and Worcester.)

Federal Courthouse

6500 Cherrywood Lane

Suite 300

Greenbelt, MD 20770

(301) 344-8018

(Alleghany, Calvert, Charles, Frederick, Garret, Montgomery, Prince Georges, St. Marys, and Washington.)

Salisbury Courthouse

U.S. Post Office Building

120 East Main Street

Room 104

Salisbury, MD 21801

(The court conducts hearings at this location but does not accept filings.)

After Filing for Bankruptcy in Maryland

Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:

  • You'll turn over financial documents proving the statements in your bankruptcy paperwork.
  • You'll attend the 341 meeting of creditors—the one appearance all filers must attend.
  • You'll complete a debtor education course and file the completion certificate.

These things all must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.

Need More Help?

You might not know this, but Nolo has been making the law easy for over fifty years. If you have questions, use the links we've included throughout for more details. Otherwise, you'll find the answers to almost all of your bankruptcy questions at www.nolo.com/legal-encyclopedia/bankruptcy.

Providing all information needed to file for bankruptcy is beyond the scope of this article. If you'd like to file without an attorney, consider buying a self-help book like How to File Chapter 7 Bankruptcy by Attorney Cara O'Neill and Albin Renauer J.D. to help you make well-informed decisions about your bankruptcy matter.

Updated April 27, 2021

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