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Understanding homestead laws in Maryland

A homeowner facing serious financial challenges might worry about the loss of a home in case of bankruptcy. Most states, including Maryland, have laws that offer certain protections in such cases. By designating a property as a homestead, it may be protected from action by creditors of certain types.

The homestead laws in Maryland do not limit the amount of acreage that can be protected from adverse possession situations, but there is a limit on the total property value. For an individual, the maximum property value is $3,000. In a Title 11 scenario, an additional $2,500 can be protected. However, this protection may be limited in certain situations. For example, a pledge of the property in question when seeking a mortgage would make the property ineligible for homestead protection. If there is a lien against the property prior to designating it as a homestead, the property would not be protected.

A property that has been repaired or improved may not be protected from possession or liquidation if money is owed to those who completed such improvements. Additionally, a homestead is not exempt from action if state or local taxes are owed. It is important to understand that because the homestead exemption law was enacted at the state level, federal law may override the exemption in certain situations. A homestead might not be protected in cases of federal tax liens, but the IRS typically does not foreclose to secure payment on tax debts.

Because real estate laws can be challenging to understand, especially in cases involving the potential for state or federal issues to conflict, discussing the implications of homestead protection with an attorney may be important. An attorney might explain whether existing liens could affect one's ability to protect a home from foreclosure. Additionally, an attorney might help in the filing of appropriate documentation for securing a homestead exemption.

Source: Findlaw, "Maryland Property and Real Estate Laws", October 13, 2014

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