Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Maryland, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. These exemptions allow individuals to retain certain assets, up to specific values, without them being liquidated or used to repay creditors. The homestead exemption in Maryland is relatively modest compared to some other states, allowing an individual to exempt up to $25,150 in equity in their primary residence as of 2021. This amount is subject to change and adjustments for inflation. It's important to note that Maryland does not allow debtors to use federal bankruptcy exemptions; instead, they must use the state-specific exemptions. Additionally, Maryland offers other exemptions that can protect property such as clothing, household goods, pensions, public benefits, tools of the trade, and a wildcard exemption that can be applied to any property. The specific amounts and types of exemptions are detailed in Maryland's state statutes, and an attorney can provide guidance on how these exemptions may apply to an individual's situation.