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Personal and Business Bankruptcy: Chapter 7, Chapter 11, Chapter 13

Chapter 7 Bankruptcy in Maryland: Using the Wildcard Exemption to Protect Your Car, Truck, Boat or Other Vehicle and Property

Other than their home, the piece of property people are most concerned about protecting in a Chapter 7 bankruptcy case is their primary car or truck. Having a reliable form of transportation is a necessity in the modern age and if filing for bankruptcy means their main car or truck must be sold to pay creditors, then many people do not want to file for bankruptcy. Some people think twice about bankruptcy if it will mean losing their second vehicle or their fishing boat or their big-screen TV or whatever big-ticket item is near and dear to them.

To protect personal and real property from being seized by the bankruptcy trustee and sold to pay creditors, the debtor must apply one of several exemptions available. Unlike some states, Maryland does not have a specific exemption for vehicles. Nor does Maryland bankruptcy law permit debtors to choose federal exemptions, like the federal vehicle exemption. But Maryland does have an exemption that provides a little more flexibility and that can be applied to vehicles and other items. This is referred to as the Wild Card Exemption.

Maryland’s wild card exemption allows bankruptcy 7 debtors to exempt up to $6,000 in cash or other property AND up to $5,000 in personal property. Either or both parts of this exemption can be applied toward vehicles or any other personal property, including boats and big-screen TV’s, for a total of $11,000. Couples may double both for a total of $22,000, though to apply that amount to a single item the item must be jointly owned. For example, if a couple is going to apply both of their exemptions toward the family’s Cadillac Escalade, the Escalade must be titled in both spouses’ names.

How Does the Maryland Wild Card Exemption Work?

Chapter 7 bankruptcy forms include a section for listing the property you want to exempt from being sold to pay your creditors. On the forms you’ll list the property and which exemption you want to apply and how much of that exemption you want to apply. For example, you may want to apply $4,000 of your wild card cash/property exemption toward your home if the homestead exemption isn’t sufficient alone and the remainder of that exemption ($2,000) plus the $5,000 personal property wild card exemption toward your primary vehicle.

When deciding how to use your wild card exemption, there are several things to keep in mind:

  • The $5,000 personal property exemption cannot be used or real estate
  • The $6,000 cash/property exemption can be applied toward any property, including vehicle, cash, real estate or personal property
  • Cash accounts that can be exempted include cash on hand, savings and checking accounts, money market accounts and similar liquid accounts
  • Real estate that can be exempted can include your primary residence, rental property or vacation property
  • Property such as vehicles, boats and other non-cash, non-real estate items can take advantage of the full $11,000 exemption (or $22,000 for couples)
  • A couple filing for Chapter 7 bankruptcy cannot apply one spouses wild card exemption toward property owned individually by the other spouse, such as a car titled in one spouse’s name
  • You may have other important property that you need to use the wild card exemption for, such as supplementing the homestead exemption if it is not enough to cover the equity in your home
  • Each debtor is also allowed $1,000 in exemptions for household furnishings, including clothes, books, pets, furniture, appliances, etc. that can be applied toward big-ticket items such as a big-screen TV but not toward vehicles.
  • An exemption is only applied toward the equity in an item of property, so if you have a loan on your car, truck or boat, you only need enough exemption to cover the equity in it to keep the bankruptcy trustee from selling the vehicle
  • Exempting a vehicle with a loan on it will not keep the lender from repossessing it; you must redeem the vehicle from the lender or reaffirm your loan to avoid repossession
  • If you don’t have enough exemption to cover the equity in a vehicle or other property, the trustee can still seize it for bankruptcy auction
  • If you applied exemptions toward an item that is sold to pay creditors, the trustee must pay you cash for the exemptions you applied and this cash is exempt
  • A vehicle or other property may not be seized for bankruptcy auction if selling the property will not result in a substantial return for the creditors; to be worth selling, the equity in the property must be enough to cover all of the following:
    • Cost of auctioning the item
    • Pay off any loan on the item
    • Amount of exemption due back to you
    • Trustee’s commission
    • Meaningful reduction of debts
  • It may be possible to stretch your exemptions further by applying only enough for each item to keep the available equity too low to be worth auctioning — however, this strategy has limits

Consult with an Experienced Maryland Bankruptcy Attorney Before Deciding on How to Use Your Wild Card and Other Exemptions

Deciding how to apply your exemptions, especially your wild card exemption, can be confusing and complicated. Many people think they have a good plan and still end up getting important items of property taken for bankruptcy auction. An experienced Maryland bankruptcy attorney can help you avoid such a situation and help you identify the best alternatives for getting the most of your exemptions in a Chapter 7 bankruptcy.

Maryland bankruptcy attorney John Burns and his firm can assist in identifying your best options for wild card and other exemptions along with all aspects of bankruptcy in Maryland. Call our office at 301-441-8780 to schedule an appointment or e-mail us at jburns@burnsbankruptcyfirm.com.

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