Some property exempt under bankruptcy law


November 06, 1994|By Michael Gisriel

Q: I saw on television last year that there were $1 million-plus residential estates in Florida and Texas that were owned by people who had filed bankruptcy but had somehow exempted these mansions from their bankruptcy filings. Is this correct? Does Maryland have a similar exemption law?

Mike Roland, Columbia

A: You are correct; both Florida and Texas have generous homestead exemptions. Under Florida law, for example, a home owned by an individual or married couple is exempt from bankruptcy creditors, with no limitation on the value, in most cases.

Maryland's laws are not so generous, but there still are exemptions useful to debtors.

The exemptions are intended to keep a debtor and the debtor's family from becoming dependents of the state. In Maryland, a bankrupt debtor may exempt up to $500 in value of household goods and apparel held primarily for personal, family or household use, plus cash or property of any kind up to a value of $3,000, plus an additional $2,500 in value of real or personal property.

A debtor also may exempt tools of the trade not exceeding $2,500 in value and any professionally prescribed health aids for the debtor or a dependent.

The amounts are per person.

A portion of a debtor's wages are protected. The greater of $145 per week or 75 percent of a debtor's take-home pay are exempt.

Finally, there are four Maryland bankruptcy exemptions that do not have a dollar limit:

* 1. All property held as tenants by the entirety is exempt from an individual bankruptcy filing -- homes and joint spousal bank accounts. Only a joint creditor of both spouses may attach property owned as tenants by entirety.

* 2. Money payable for medical expenses or as compensation for a personal injury.

* 3. Any money payable as the result of a retirement plan qualified under the U.S. Internal Revenue Code. This exemption is restricted to the portion of assets attributable to contributions that were deductible.

* 4. The proceeds, including death benefits, cash surrender and loan values for life insurance policies and annuity contracts for the benefit of the debtor's spouse, children or dependent relative.

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