Filing for bankruptcy can be a difficult and emotional decision, often driven by overwhelming financial stress. However, it doesn’t necessarily mean losing your home. In Maryland like many other states, there are specific laws and options that can help you protect your home while navigating the bankruptcy process. This article will explore strategies and provisions that can help you keep your home when filing for bankruptcy in Maryland.
Chapter 7 vs. Chapter 13 Bankruptcy
In Maryland, you have the option of filing for either Chapter 7 or Chapter 13 bankruptcy. The choice you make can significantly impact your ability to keep your home.
Chapter 7 Bankruptcy
Also known as liquidation bankruptcy, Chapter 7 involves selling non-exempt assets to pay off creditors. In Maryland, there is a homestead exemption that allows you to protect a certain amount of equity in your primary residence. If your home’s equity is within the exemption limit, you can usually keep your home.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy allows you to create a repayment plan to catch up on past-due payments while keeping your home. You can spread the arrears over three to five years, making it more manageable to maintain your mortgage.
Maryland Homestead Exemption
Maryland offers a homestead exemption that protects a certain amount of equity in your primary residence from creditors during bankruptcy. As of September 2021, the homestead exemption amount was $25,150. This means that if the equity in your home is less than or equal to this amount, it should be protected from creditors during Chapter 7 bankruptcy proceedings.
Reaffirmation Agreement
In Chapter 7 bankruptcy, you have the option to reaffirm your mortgage debt. This means that you agree to continue making payments on your mortgage, effectively excluding it from the bankruptcy discharge. By reaffirming the debt, you can keep your home and continue building equity.
Curing Arrears in Chapter 13
If you’re behind on your mortgage payments and facing foreclosure, Chapter 13 bankruptcy provides an opportunity to cure these arrears. The repayment plan allows you to make regular mortgage payments while catching up on the past-due amounts over the plan’s duration.
Consultation with an Experienced Attorney
One of the most crucial steps in navigating bankruptcy while keeping your home is consulting with an experienced bankruptcy attorney. They can assess your unique financial situation, guide you through the process, and help you make informed decisions about which bankruptcy chapter is most suitable for your circumstances.
Maintaining Current Mortgage Payments
Regardless of whether you file for Chapter 7 or Chapter 13 bankruptcy, it’s essential to keep making your current mortgage payments. Falling behind on your post-bankruptcy mortgage payments could still lead to foreclosure.
Conclusion
Filing for bankruptcy in Maryland doesn’t automatically mean losing your home. With careful planning, understanding the nuances of Maryland’s bankruptcy laws, and seeking expert legal advice, you can protect your home and work toward a more stable financial future. Remember that bankruptcy laws and regulations can change over time, so it’s essential to consult with an attorney or financial advisor who is up-to-date with the latest laws and can provide personalized guidance tailored to your situation.
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