What Can I Keep in a Chapter 7 Bankruptcy

What Can I Keep in a Chapter 7 Bankruptcy?

For an individual, there are two types of bankruptcy–a Chapter 7, which is a liquidation, and a Chapter 13, which is a reorganization of debts. The names come from the part of the federal bankruptcy code that provides information and requirements for both legal proceedings. Bankruptcy involves both federal and state law. So, you may wonder what can I keep in a Chapter 7 bankruptcy? With the Law Office of Nick Del Pizzo, a Baltimore law firm, we are here to inspect.

What is the purpose of a Chapter 7 Bankruptcy?

A Chapter 7 bankruptcy wipes out unsecured debts such as credit cards and medical bills. Unsecured debts are debts that do not involve property being taken to satisfy the obligation if the payments are missed. For example, a mortgage is a secured debt which means that the bank or other lending institution that lent the money to buy the house can reclaim the house if the payments are missed.

In a Chapter 7 bankruptcy, a trustee gathers up the goods you own that have value and sells them to satisfy your creditors. For most people declaring Chapter 7, this isn’t a problem, as they don’t have much of value.

If, after the sale of the goods, the money obtained isn’t enough to pay the amounts owed, the creditors must be satisfied with what they got and can’t go after you for more money. It’s not unusual for unsecured creditors to receive nothing in a Chapter 7 bankruptcy proceeding.

But not everything can be taken by the trustee to satisfy your debts. The law allows debtors to keep some property.

Maryland Bankruptcy Homestead Laws

The homestead exemption protects homeowners when they have equity in a property up to a certain amount if they file bankruptcy. Although, the amount of the homestead exemption allowed varies state by state; in Maryland, the homestead exemption amount is the same as the federal amount - $23,675. The homestead exemption applies to property such as a home, a condo or a co-op. You have to own or occupy the property to protect the equity.

Maryland bankruptcy law does not allow couples who are filing bankruptcy together to double their homestead exemptions.

Another way to protect property is when it is held as “property held as tenancy.” This means that when property, such as a home, is held as a married couple and not as two separate individuals, then creditors can’t take the house to satisfy debts owed by one of you. For example, if your spouse owes large credit card bills that are only in his name, then creditors can’t take the house in order to settle the debt.

Bankruptcy Law on Personal Property and Other Items

There is no specific bankruptcy exemption for your car. But you can use the “wildcard” exemption to protect the equity of the vehicle up to a certain amount. The wildcard exemption allows a debtor to exempt $6,000 of value of any item they own.

Personal property of up to $5,000 in tools needed for your trade, including clothing, books, tools and inventory, can be exempted from the bankruptcy.

Professionally prescribed health aids and up to $1,000 in appliances and furnishings, clothing, pets and books for use by you or your dependents can be exempted from the bankruptcy.

If you have a credit card or a debt that you want to keep after the bankruptcy proceedings, you can do that by letting the court know that you want to affirm the debt which means that you will continue to make the monthly payments. Sometimes, it’s possible in a Chapter 7 to hold on to a car or a house with low equity by exempting the equity and affirming the monthly payments if you haven’t fallen behind.


About The Law Offices of Nick Del Pizzo

At the Law Offices of Nick Del Pizzo, we make ourselves available for our clients in a variety of case types. Ranging from foreclosure, bankruptcy, personal injury or medical malpractice. Whatever your legal need is, we are there for you, seven days a week. Your case becomes our cause, and we will seek the best resolution possible. 

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