New Personal Bankruptcy Laws in Maryland

Maryland Median Income Test

On a nationwide basis, debtors generally choose between two chapters of bankruptcy in order to file an individual bankruptcy petition, either chapter 7 or chapter 13. As chapter 7 is typically much faster and less expensive overall than a chapter 13 bankruptcy, the new BAPCPA legislation requires a median income test as the first step to qualifying for a chapter 7 bankruptcy. As a resident of Maryland, you must compare the total annual income of your household with the median annual income of other households of the same size as yours in Maryland. If your income is lower, you qualify to file Chapter 7 in Maryland.

If your annual income is too high to pass the Maryland median income test, you must complete the full "means test" to determine if you can still qualify for chapter 7. The means test is another creation of the BAPCPA legislation and involves subtracting various expenses from your income to determine your disposable income. Allowable expenses for items such as food, housing and utilities are determined by U.S. Census Bureau and Bureau of Labor Statistics data and can be specific down to the Maryland county in which you reside. According to the terms of the test, if your remaining disposable income is too high, you must file chapter 13 and make payments to creditors rather than filing chapter 7 and making no payments at all.

Although a chapter 7 bankruptcy allows you to avoid making payments to creditors, you may have to relinquish certain assets to the bankruptcy trustee for liquidation. As a Maryland resident, you can protect some assets across eight categories, including public benefits, pensions and certain personal property, such as burial plots. However, if your assets are nonexempt, meaning they are worth more than your allowable Maryland exemptions, the trustee has the right to seize and liquidate those assets. If you file chapter 13 in Maryland, all of your assets are exempt.

To have your petition accepted by the court, you must file it in the correct courthouse. Maryland only has one bankruptcy district, unlike some other states which can have four or more. However, the court does have three distinct court locations, in Greenbelt, Salisbury and Baltimore. Which courthouse you file in depends on your county of residence. The Maryland Bankruptcy Court website can direct you to the correct courthouse.