Posted On: September 8, 2017
Posted by: Deborah Kurfiss
Maine has some specific rules that govern bankruptcy, but before we get into that, let’s take a look at the state that lies the farthest north in New England. Maine is a state of dense forests, low mountains, beautiful waterways, and a rocky coast that is studded with lighthouses. Its charms include beaches, the heavily forested granite islands of Acadia National Park, and seafood cuisine that features lobsters and clams. Mt. Katahdin in Baxter State Park marks the northern end of the Appalachian Trail.
Maine was home to many different indigenous nations for centuries. As Europeans began to settle America, both French and English settlements sprang up, though many failed due to the harsh climate and altercations with the native population. American and British forces fought over the land that later became Maine in both the American Revolution and the War of 1812. At the end of the War of 1812, the land was held by the British, but they ceded it to the United States, where it became part of the Commonwealth of Massachusetts until 1820. In 1820, Maine was permitted to secede from Massachusetts and became the 23rd state as part of the Missouri Compromise.
Looking at the present day, in 2016, the state’s per capita personal income (PCPI) was $44,316, which was 89% of the national average of $49,571, ranking Maine 32nd-lowest PCPI in the United States. Maine’s PCPI increased by 3.6% . from 2015 to 2016, which was greater than the national change of 2.9%. In 2016, Maine’s current-dollar GDP was $59.3 billion, placing it 43rd in the United States. Maine’s real GDP grew 1.4% from 2015 to 2016, just below the national change of 1.5%.
For residents of Maine who may be struggling with debt while the economy recovers, bankruptcy may be an option.
Chapter 7 Bankruptcy in Maine: The Basics
Bankruptcy is a federal action, and the primary bankruptcy laws are found in Title 11 of the U.S. Code. Far more people file a Chapter 7 bankruptcy for liquidation than they file a Chapter 13 reorganization bankruptcy, though with either you will pay pennies on the dollar for your debt.
Even though bankruptcies are filed in federal court, states are allowed to pass some bankruptcy-related laws. These include lists of bankruptcy exemptions, which allow property to become safe from sale by the bankruptcy trustee.
Many people don’t realize that when they file for bankruptcy, they often can keep their property, including their house, car, and retirement benefits. Below, we’ll take a look at some of Maine’s bankruptcy exemptions and how their system works.
See also: Don’t Sell Property to Avoid Bankruptcy
Maine Bankruptcy Exemptions: What property can I keep?
You can find a list of federal bankruptcy exemptions in the U.S. Bankruptcy Code, but every state also has its own list of exemptions. Some states let you choose which list works best for you, but other states, Maine included, insist that you use the state bankruptcy exemptions. You may, however, also use federal non-bankruptcy exemptions, such as those regarding veterans’ benefits and military retirement accounts.
Since exempt property is the only property safe from the bankruptcy trustee, it’s important for you to have a good idea what is legally exempt. Often, exemptions may only include up to a certain value. This value applies to the equity you have in the property rather than its total value.
You should speak with your bankruptcy attorney about specifics, but the following will give you an idea of some of the exemptions you can take. Please note that married couples in Maine who are filing a joint bankruptcy are each entitled to their own exemptions. The effect of this is to double the amount of exemptions for marital property.
Maine Bankruptcy ExemptionsThe top 5 exemptions under Maine state law.
|Type of exemption||Maine law|
|Homestead||$47,500; more if a minor dependent lives with you, if you are age 60 or older, or you are disabled|
|Personal property||Household furnishings and goods, clothing, appliances, books, animals, and musical instruments not to exceed $200 in value per item; jewelry up to $750; $5,000 in tools of the trade; food provisions for six months|
|Wages||Not exempt, but you can use up to $6,000 of an unused homestead exemption|
|Pension/retirement||Exempt to the extent reasonably necessary to support you or your dependents|
Maine entitles you under 14 M.R.S. § 4422 (1) to take up to a $47,500 exemption in real or personal property (such as a trailer) that you use as a residence. You may also use this exemption for a burial plot. If a minor dependent lives with you, you can take up to $95,000 except that if your interest is held jointly with any other person or persons, the exemption may not exceed in value the lesser of $47,500 or the product of your fractional share times $95,000.
If you or your dependent is 60 years of age or older, or is physically or mentally disabled such that you cannot maintain employment and you expect the disability to last at least 12 months, you are also entitled to an exemption that does not exceed the lesser of $95,000 or the product of the fractional share of your interest times $190,000.
Example: You are 35 years old and unmarried. You bought a $200,000 house, and your equity in the house is $45,000. Your equity is below the $47,500 exemption, and your house is safe from the bankruptcy trustee. If your equity was greater than $47,500, the trustee could sell your house, though as a practical matter, the more equity you have above the exemption amount, the more likely it is to be sold.
Personal Property Exemptions
You can take a number of personal property exemptions under various sections of 14 M.R.S. § 4422.
- Household furnishings and goods, clothing, appliances, books, animals, crops, and musical instruments not to exceed $200 in value per item. 14 M.R.S. § 4422 (3)
- Jewelry not to exceed a total value of $750. 14 M.R.S. § 4422 (4)
- Tools of your trade not to exceed $5,000. 14 M.R.S. § 4422 (5)
- A cooking stove, heating furnaces, and fuel of specified amounts. 14 M.R.S. § 4422 (6)
- Food provisions for six months, and seeds and other materials to grow food for one growing season. 14 M.R.S. § 4422 (7)
- Farm equipment, one of every type. 14 M.R.S. § 4422 (8)
- One commercial fishing boat not over 46 feet in length. 14 M.R.S. § 4422 (9)
- Logging implements. 14 M.R.S. § 4422 (9A)
- Professionally prescribed health aids. 14 M.R.S. § 4422 (12)
Motor Vehicle Exemption
A motor vehicle not to exceed $5,000 in value is exempt during a Chapter 7 bankruptcy. 14 M.R.S. § 4422 (2)
Example: If you bought a $20,000 car but have only $5,000 equity in it, your car is safe from the bankruptcy trustee. However, if you bought a $20,000 car and you have $10,000 equity in it, the bankruptcy trustee could sell the car to help pay your debts.
No exemption, but you could use up to $6,000 of your unused homestead exemption. M.R.S. § 4422 (16)
Insurance and Damages Awards
Unmatured life insurance contract. 14 M.R.S. § 4422 (10)
Life insurance dividends, interest, and loan value not to exceed a $4,000 value. There are some limitations. 14 M.R.S. § 4422 (11)
Crime victim’s reparation award, wrongful death award, and a personal injury award not to exceed $12,500. Also an award for loss of future earnings. M.R.S. § 4422 (14)
Benefits and Pension/Retirement Exemptions
A payment or account under a stock bonus, pension, profit sharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for your support and any of your dependents. 14 M.R.S. § 4422 (13)
Up to $400 in any property under 14 M.R.S. § 4422 (15).
Unused homestead exemption up to $6,000 may be used to exempt any property under M.R.S. § 4422 (16).
Where will I file bankruptcy in Maine?
Filing bankruptcy is a big step, and it is often accompanied by a great deal of confusion and stress. If you are even considering filing bankruptcy, talk to a good Maine bankruptcy attorney. If you see them in enough time, they may even be able to advise you of options short of filing bankruptcy.
Whether or not you proceed with bankruptcy, you will want to hold onto as many of your assets as you can, and an attorney an best advise you about that. You may think you can save money by filing your own bankruptcy, but an experienced bankruptcy lawyer knows how to protect your assets.