By Marc Kivitz, Esq. and edited by Tiffany Franc, Esq.

Bankruptcy exemptions are claimed pursuant to 11 U.S.C. §§ 522(b)(3)(A) and (B). Property that may be claimed as exempt as permitted by the State or local law that is applicable on the date that the Petition in bankruptcy is filed includes (i) State statutory law, (ii) Federal law other than 11 U.S.C. § 522(d), and (iii) applicable non-bankruptcy law which includes (a) Federal common law and (b) State common law. Note: Figures are subject to periodic adjustment. Readers should independently verify current statutory amounts.

State Statutory Exemptions

  • In Maryland, an individual judgment debtor may claim as exempt from attachment by a judgment creditor equity in the amount of $1,000.00 for personal property such as household goods and wearing apparel, and $6,000.00 for equity in real and personal property, pursuant to the Annotated Code of Maryland, CJ § 11-504(b)(4) and (5), respectively. The exemption is claimed by filing in the judicial proceeding from which the judgment arose a Claim of Exemption, and in a bankruptcy case on Schedule C, asserting both the asset being protected and the amount of the exemption. The exemption must be claimed in order for it to be enforced.
  • Were the judgment debtor to file a bankruptcy case in Maryland under the Bankruptcy Code, 11 U.S.C. §§ 101 – 1331, then the debtor may claim an additional $5,000.00 in equity in personalty – but not realty — as exempt pursuant to Maryland Annotated Code, CJ § 11-504(f)(1)(i), and may also claim $25,150.00 in equity in an owner-occupied residential real property.
  • With the filing of a case under Title 11 of the United States Code – the Bankruptcy Code – the debtor may claim an additional $5,000.00 for personal property (but NOT real estate) and the $25,150.00 for equity in owner-occupied residential realty.
  • Practice Tip: If the homestead is underwater real estate then exempt it for $1 under 11-504(b)(5) rather than 11-504(f)(1)(ii) so that the limit on successive uses of the homestead under (f)(2)(i) or the usage by others limit under (f)(2)(ii) do not come into play.
  • The total specific-dollar available exemptions for an individual in a bankruptcy case for personal property is thus $12,000.00 — $1,000.00 under CJ § 11-504(b)(4) with limitations as to its applicability which does not include such assets as bank accounts or cars; plus $6,000.00 under CJ § 11-504(b)(5) applicable to any asset real or personal; and plus $5,000.00 under CJ § 11-504(f)(1)(i) applicable only to personalty.
  • The entire, or any unused portion of the, $6,000.00 exemption pursuant to CJ § 11-504(b)(5) may be applied and added to the owner-occupied residential realty exemption of $25,150.00, resulting is a maximum individual statutory exemption of residential equity of $28,975.00.

Other Maryland Statutes

  • Bank accounts as tenants by the entirety property. ACM, C&JP §11-603(a), bank accounts as tenants by the entirety assets — provides that a garnishment is not valid against a bank account jointly held by husband and wife unless both the husband and wife are judgment debtors. Consequently, any bank account on which the names of husband and wife appear is a tenant by the entirety asset exempt from attachment except by joint creditors. This statutory exemption is without regard to whether one or both of the account holders execute the checks for disbursements from the bank account. This statute codified the holding in Andree v. Equitable Trust Co., 420 A.2d 1263, 46 Md. App. 688 (1980), that a judgment creditor who has a claim against one spouse, but not both, may not attach a joint banking account, in trust for another, and subject to the order of either, payable upon death to the survivor, in the absence of fraudulent conduct by a husband and a wife.
  • Lease security deposits. ACM, Real Property Article § 8-203(3)(ii) provides a separate exemption for residential lease security deposits. RP § 8-203(d)(3) The statute (RP § 8-203(d)(3)(ii)) reads, “(ii) A security deposit under this section may not be attached by creditors of the landlord or of the tenant.”
  • Insurance policies. ACM, Insurance § 16-111; CJ § 11-504(b)(2); [formerly Art. 48A, § 385]. In re Kleinman, 272 B.R. 339 (Bankr. D.Md. 2001)(life insurance proceeds exempt); In re Kleinman, 274 B.R. 171 (Bankr. D.Md. 2002) (motion to alter or amend denied). But see, In re Rief, Not Reported in F.Supp.2d, 2008 WL 168951 (D. Md. 2008), where a Trust was the beneficiary of the life insurance and in sustaining the Chapter 7 trustee’s objection to exemptions both the Bankruptcy Court and US District Court held it not to be exempt under ACM, Ins. § 16-111.
  • 529 Education Accounts. Maryland College Savings Plan accounts are exempt in Maryland. Md. Education Code Ann. § 18-1913 as MD prepaid tuition contracts. More specifically, 11 U.S.C. § 541(c)(2) renders them not property of the estate, except for deposits made within one (1) year, and deposits over $5,475.00 made between 1 – 2 years pre-petition. If it is a MD plan, the part that is property of the estate is exempt under Md. Code, Educ. Art., § 18-19A-06.1. That only applies to MD plans, and it is questionable whether an exemption of another State’s plan under the other State’s law would apply if Maryland (or Federal) exemptions apply, so the debtor may have to use the “wildcard” exemptions under CJ § 11-504(b)(5) and CJ § 11-504(f)(1)(i). However, some states (including Virginia: Va. Code 23-38.81(f)) impose restraints on alienation of their 529 plans that would remove them from property of the estate under 11 U.S.C. § 541(c)(2). Thus, all except last year’s contributions, and amount of 2nd-to-last year’s contributions over $5000 is excluded from property of the estate under 11 U.S.C. § 541(b)(6). The rest is exempt per Md. Education Code Ann. 18-19A-06.1.
  • Cemetery plots. ACM, Bus. Reg. § 5-503(b)(2).
  • Transfers between spouses. ACM, Fam.Law § 4-301(b)(2) is the provision governing transfers. Such transfers can be attacked by present creditors as long as the claim is brought within three (3) years from the date of the transfer. See, e.g., Young v. Young, 376 A.2d 1151, 37 Md.App. 211, cert. den., 281 Md. 746.
  • State employees’ pension/retirement funds. ACM, SPP § 21-502).

Federal Law Other than 11 U.S.C. § 522(d)

11 USC § 522(b)(3)(A) provides that a debtor who elects the applicable state law exemptions can also exempt property under federal, non-bankruptcy exemptions. Inconveniently, those exemptions are scattered all over the U.S. Code:

  • Veteran’s disability benefits. 38 U.S.C. § 5301(a)(1). Exempt before and after receipt, including lump sum back benefits. This may not be quite the same protection as Social Security, but here the bank does not have to make the exemption determination itself as it does with money from Social Security.
  • Social Security Disability Benefits. 42 U.S.C. § 407; See also 42 U.S.C. § 659. 75% of earned but unpaid wages 15 U.S.C. § 1673.
  • CIA employees. 50 U.S.C. § 403.
  • Civil Service retirement benefits. 5 U.S.C. §§ 8346, 729, 2265.
  • Crop Insurance proceeds. 7 U.S.C. § 1509.
  • Debt Collection Improvement Act of 1996. 31 U.S.C. § 3716.
  • FEMA benefits. 44 C.F.R. § 206.110(g).
  • Benefits, annuities, or payments to survivors of foreign service employees. 22 U.S.C. § 4060(c).
  • GAO Service Annuity. 31 U.S.C. § 776.
  • Federal homestead lands on debts contracted before issuance of the patent. 43 U.S.C. § 175.
  • Indian tribe exemptions. 25 U.S.C. § 410.
  • Annuities paid to: survivors of a Justice or judge of the United States, a Director of the Administrative Office of the United States Courts, a Director of the Federal Judicial Center, or an administrative assistant to the Chief Justice of the United States. 28 U.S.C. § 376(n).
  • Klamath Indians Tribe – Oregon. 25 U.S.C. §§ 543, 545.
  • Benefits for surviving spouses of Lighthouse Service personnel. 33 U.S.C. § 775.
  • Death and disability benefits paid pursuant to: the Longshoremen’s and Harbor Workers’ Compensation Act. 33 U.S.C. § 916.
  • Special pensions awarded to: persons on the Army, Navy, Air Force and Coast Guard Medal of Honor roll. 38 U.S.C. § 1562(c).
  • Military survivor annuities paid pursuant to: the Survivor Benefits Plan. 10 U.S.C. § 1450(i).
  • Public Safety Officer Death Benefits. 42 U.S.C. § 3796.
  • Railroad Retirement Act annuities and pensions. 45 U.S.C. § 231m.
  • Railroad workers’ unemployment insurance benefits. 45 U.S.C. § 352(e).
  • Wages of fishermen, seamen, and apprentices. 46 U.S.C. §§ 601, 11109(a).
  • Benefits due or to become due under: servicemen’s groups life insurance or veteran’s group life insurance. 38 U.S.C. §§ 1970(g) and 770(g).
  • Student Loan Proceeds. 20 U.S.C. 1095a(d).
  • Exempt benefits available under Supplemental Security insurance. 42 U.S.C. § 1383.
  • Annuities paid to: members of the armed services, based on retirement or retainer pay. 10 U.S.C. § 1440.
  • United States service member’s deposits in: a savings institution while the depositor is on permanent duty outside of the United States. 10 U.S.C. § 1035(d).
  • Veterans’ benefits. 38 U.S.C. § 5301(a).
  • War Compensation – Hazard, Death, Injury. 42 U.S.C. § 1717.
  • 529 College Fund – exempted when the parent (debtor) has paid into a fund for the child. 20 U.S.C. § 1095 a(d).
  • IRS has its own exemption scheme. You should be able to pay off the secured portion of the debt without converting to a 13 if the property is exempt from execution, since the IRS will not execute on it. However, the lien attaches to after-acquired property so the payment should be made
    promptly. From the IRS manual: (07-03-2009) Equity Determination — Exempt Assets.

Federal Common Law Exemptions

  • Bank account funds derived from: exempt pensions, IRAs and 401ks, Social Security maintain exempt status indefinitely. In re Sunstrom, 2012 WL 5305807 (Bankr. D. Md., October 26, 2012)(NO. 11-31097-DER)(Rice, J.).
  • Exemption of pension traced to bank account. In re Massenburg, 2014 WL 1320344 (Bankr. D. Md. Mar. 31, 2014)(Catliota, J.).
  • Retirement accounts:
    • It is the public policy of Maryland to protect from creditors certain assets set aside to support individuals financially in retirement; there is no dollar limit on this State exemption. In re Solomon, 166 B.R. 832 (Bankr. D.Md.), aff’d 174 B.R. 325 (D. Md. 1994). The statutory limitations on the retirement plan exemption, embodied in ACM, CJ §§ 11-504(h)(1) and (h)(4), appear to satisfy the “reasonable amount” standard in the exemption mandate of the Maryland Constitution.
    • This exemption is limited to the tax deductible portion of the retirement plan. Wolff v. Gibson, 300 B.R. 866 (Bankr. D.Md. 2003).
    • The State exemption is broader than the Federal exemption. Id., Wolff v. Gibson. ACM, CJ § 11-504(h) provides an unlimited exemption for any money payable to a participant under a qualified retirement plan. This exemption includes both qualified pension plans and IRAs. However, this exemption is only valid to the extent that contributions are made consistent with IRS requirements. For example, if an individual has $100,000 in a certificate of deposit which would not be exempt, he cannot simply deposit the funds into a pre-existing IRA account since this would exceed the deductible amount allowable under the Internal Revenue Code that may be deposited into an IRA account in a given year. The validity of the unlimited IRA exemption in Maryland was reaffirmed by the United States Court of Appeals for the Fourth Circuit in In re Solomon, 67 F.3d 1128, 1132-33 (4th Cir. 1985). Although 11-504(h) does not state a dollar limit, the ability to exempt the retirement account is limited by the I.R.C. provisions for deductibility. In other words, if in any given year an individual could deduct on an income tax return the sum of $2,000.00 for an I.R.A. account contribu­tion, but deposited $5,000.00 to an I.R.A. account, then the maximum exemption would be $2,000.00 and the balance of $3,000.00 would be an asset available for attachment by creditors, unless this balance were otherwise exempted under some other statute.

State Common Law Exemptions

Tenancy by Entirety as Exempt Property. In Maryland a transfer of property to a husband and wife creates a tenancy by the entirety, unless there is an expressed intention to create some other form of ownership, and property purchased with entirety money is likewise entirety property. In re Ginn, 186 B.R. 898 (Bankr. D.Md. 1995)(tenancy by entirety exemption may be claimed in case commenced by joint petition), citing, Beall v. Beall, 291 Md. 224, 234, 434 A.2d 1015 (1981); M. Lit. Inc. v. Berger, 225 Md. 241, 248, 170 A.2d 303 (1961). This exemption may be claimed by a debtor under 11 U.S.C. § 522(b)(3)(B) and Maryland common law.

  • Challenge to entireties protection. The Supreme Court held that property titled as a tenancy by the entirety could be levied by the Government, through its agency, the Internal Revenue Service, for federal income taxes owed solely by one spouse. United States v. Craft, 535 U.S. 274 (2002). This decision concerned provisions of the Internal Revenue Service Code, 26 U.S.C. § 6321, and the effect of the issuance and recordation of a federal tax lien.
  • Craft not extended to bankruptcy trustee. Hatchett v. U.S., 330 F.3d 875 (6th Cir. 2003)(applying Craft retroac­tively to case then pending before Court of Appeals); In re Greathouse, 295 B.R. 562 (Bankr. D.Md. 2003)(Keir, J.).
  • The Amount of the Exemption Claimed is crucial. See, In re Forti, 224 B.R. 323 (Bankr. D.Md. 1998)(Derby, J.); Taylor v. Freeland & Kronz, 503 U.S. 638, 643-44 (1992); Schwab v. Reilly, 560 U.S. 770, 791 (2010).
  • You get the amount you claim; claim $1.00 then you only get $1.00.

Marc KivitzMarc R. Kivitz is with the Law Offices of Marc R. Kivitz.




Tiffany S. Franc is with Yumkas, Vidmar, Sweeney & Mulrenin.