Filing for Bankruptcy in Maine

In most respects, filing for bankruptcy in Maine isn’t any different than filing in another state. The Maine bankruptcy process falls under federal law.

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Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to COVID-19 or another event, bankruptcy can help. Here, you'll find:

  • an explanation about Chapters 7 and 13
  • checklists to help you understand the process and stay organized
  • Maine's property exemption laws and filing information, and
  • links to our bankruptcy quiz, an online qualifying tool, and other helpful resources.

However, we couldn't squeeze everything into this article, so be sure to check out its companion What You Need to Know to File for Bankruptcy—you'll find lots more details there.

How Bankruptcy Works in Maine

In most respects, filing for bankruptcy in Maine isn't any different than filing in another state. The bankruptcy process falls under federal law, not Maine state law, and it works by unwinding the contracts between you and your creditors—that's what gives you a fresh start.

But Maine's laws come into play, too, in a significant way. They determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after going over some basics.

Choosing the Right Bankruptcy Chapter For You in Maine

Most people file either Chapter 7 or Chapter 13. If you don't know the differences between the two, you're not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.

Chapter 7 bankruptcy. Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick—it only takes a few months to complete. And it's cheap—you don't pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.

People with more assets could lose them, however, especially if they own unnecessary luxury items. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas—even your house or vehicle if you have too much equity in it or you're behind on the payments. Unlike Chapter 13, Chapter 7 doesn't have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind when you file.

Chapter 13 bankruptcy. By contrast, Chapter 13 filers must pay creditors some or all of what they owe using a three- to five-year repayment plan. But the payment plan allows Chapter 13 to offer benefits not available in Chapter 7. For instance, not only do you keep all of your property, but you can save your home from foreclosure or your car from repossession. If you need time to repay a debt you can't discharge in bankruptcy, you can use this chapter to force a creditor into a payment plan. The biggest downside to this chapter? It can be expensive. Many people can't afford the monthly payment. Learn more about when filing Chapter 13 is better than Chapter 7.

Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.

Will Filing Bankruptcy in Maine Erase My Debts?

Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a "secured debt"—if you don't pay what you owe, the lender gets to take the property back.)

But you can't discharge all debts. Nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy, and student loans aren't easy to wipe out (you'd have to win a separate lawsuit). You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worth your while.

Steps in a Maine Bankruptcy

We all know that seeing the forest helps us recognize the trees, so it's probably a good time to consider the significant steps you'll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You've already made headway on the first two items!

Bankruptcy Steps Checklist

Keeping Property When Filing Bankruptcy in Maine

You won't lose everything in bankruptcy. You'll use your state bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you'll keep in your case.

  • Exempt and nonexempt property. You can keep property protected by an exemption or "exempt" property. When a bankruptcy exemption doesn't cover the property, you'll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
  • Choosing state or federal exemptions. Unlike some other states, you can't choose between the state exemption list and the list of federal bankruptcy exemptions. You must use Maine's exemptions. But you can use the federal nonbankruptcy exemptions.
  • Doubling exemptions. Spouses filing together can double the exemption amount if both own the property, unless noted otherwise.
  • COVID-19 recovery rebate exemption. You might be able to protect stimulus payments, tax credits, and child credits in bankruptcy with the federal recovery rebate exemption.
  • Retirement accounts all filers can protect. You can keep tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,362,800 per person (as of June 2021). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.

Maine Bankruptcy Exemptions

Here are some of the bankruptcy exemptions commonly used in Maine.

Maine Homestead Exemption

You'll be able to protect up to $47,500 of equity in any real or personal property used as a residence, including co-ops, or in a burial plot. The amount increases to $95,000 if minor dependents reside with you, or if you or your dependent is 60 years of age or older, or has a mental or physical disability and is unable to maintain gainful employment. (Me. Rev. Stat. Ann. tit. 14, § 4422(1).) Check with a local bankruptcy attorney about doubling this exemption.

Learn about qualifying for Maine's homestead exemption in bankruptcy.

Maine Motor Vehicle Exemption

Filers can protect up to $7,500 of equity in one motor vehicle. (Me. Rev. Stat. Ann. tit. 14, § 4422(2).) Find out how the motor vehicle exemption works in a Chapter 7 case.

Other Maine Bankruptcy Exemptions

  • Personal property. Up to $200 per item in household goods and furnishings, clothing, appliances, books, animals, crops, and musical instruments (Me. Rev. Stat. Ann. tit. 14, § 4422(3)); up to $750 worth of jewelry for personal or family use (Me. Rev. Stat. Ann. tit. 14, § 4422(4)); one cooking stove, furnaces and stoves used for heating, and up to ten cords of wood, five tons of coal, and 1,000 gallons of petroleum for personal or family use (Me. Rev. Stat. Ann. tit. 14, § 4422(6)); up to $5,000 in tools needed in a trade, including books, tools, and inventory (Me. Rev. Stat. Ann. tit. 14, § 4422(5)); up to 6 months worth of food, seed, feed, and materials for raising food (Me. Rev. Stat. Ann. tit. 14, § 4422(7)); one of each type of farm equipment reasonably necessary to raise and harvest commercial agricultural products (Me. Rev. Stat. Ann. tit. 14, § 4422(8)); one boat, up to five tons burden, used primarily for commercial fishing, and one of each type of professional logging equipment necessary to harvest and haul wood commercially (Me. Rev. Stat. Ann. tit. 14, §§ 4422(9) & (9A)); professionally prescribed health aids for you or your dependents (Me. Rev. Stat. Ann. tit. 14, § 4422(12)).
  • Insurance and damages. Any unmatured life insurance contract (Me. Rev. Stat. Ann. tit. 14, § 4422(10)); up to $4,000 in dividend or loan value of an unmatured life insurance contract, for which you or your dependent is the insured (Me. Rev. Stat. Ann. tit. 14, § 4422(11)); crime victim's reparation awards, life insurance proceeds or awards for the wrongful death of a person upon whom you were dependent, loss of future earnings awards and up to $12,500 in personal injury damages for you or a person upon whom you are dependent (Me. Rev. Stat. Ann. tit. 14, § 4422(14)).
  • Public benefits and support. Social Security, unemployment compensation, veteran's, disability, and public assistance benefits, including the federal earned income and additional child tax credits; alimony and support, reasonably necessary for the support of you and your dependents (Me. Rev. Stat. Ann. tit. 14, § 4422(13), tit. 39, § A-106).
  • Retirement benefits. ERISA-qualified benefits needed for support: payments or accounts under a stock bonus, profit-sharing, pension, annuity, or similar plan on account of illness, disability, death, age or length of service, to $1,000,000 (Me. Rev. Stat. Ann. tit. 14, § 4422(13-A)); state employees' retirement accounts and benefits (Me. Rev. Stat. Ann. tit. 5, § 17054). Tax-exempt retirement accounts, including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined-benefit plans, to a certain amount, are exempt under 11 U.S.C. § 522(b)(3)(C). Learn more about retirement accounts in bankruptcy.
  • Wildcard. Up to $400 in any property (Me. Rev. Stat. Ann. tit. 14, § 4422(15)); up to $6,000 of unused homestead exemption value can be used to protect the following types of property only: animals, crops, musical instruments, books, clothing, furnishings, household goods, appliances, jewelry, tools of the trade, and personal injury recoveries (Me. Rev. Stat. Ann. tit. 14, § 4422(16)).

    Other exemptions exist and amounts adjust periodically, and other exemptions exist. You'll find Maine's exemption statutes on the Maine Legislature website but the best way to protect your assets is by consulting with a local bankruptcy lawyer.

    Preventing Bankruptcy Exemption Problems

    Exempt your property carefully. The bankruptcy trustee—the court-appointed official assigned to manage your case—will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.

    Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art—at least in his mind—Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.

    Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.

    Qualifying for Bankruptcy in Maine

    If you've never filed for bankruptcy before, you'll meet the initial requirement. Otherwise, check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.

    You'll also need to meet specific chapter qualifications.

    You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").

    Want an easy way to do this online? Use the Quick Median Income Test. If you find that you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.

    Qualifying for Chapter 13 can be an expensive proposition because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:

    Find out more about calculating a Chapter 13 bankruptcy payment.

    Hiring a Bankruptcy Lawyer in Maine

    Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:

    • qualify for the chapter of your choice
    • determine when it's time to file
    • help you keep the property you want
    • make sure you don't run afoul of fraud or other issues, and
    • explain when you can stop paying the bills you'll erase in your case.

    You can expect creditors to call until you file. It's usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.

    Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about the bankruptcy process. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?

    Filing Your Bankruptcy in Maine

    Now that you've decided to file, the fun begins! Well, not really. The first step—gathering your financial information—can be a bit of a chore. But using our bankruptcy document checklist should help you organize the things you (or your attorney) will need.

    Bankruptcy Document Checklist

    Bankruptcy Forms, Means Test Multipliers, and Course Providers

    After assembling the documents, your next step will be to prepare the paperwork. Here's what you'll need and where to find it.

    • Bankruptcy forms. You'll find free downloadable bankruptcy forms on the U.S. Courts website.
    • Means test multipliers. Go to the U.S. Trustee website to get the figures needed to complete the means test.
    • Education providers. The U.S. Trustee website also lists providers under "Credit Counseling & Debtor Education." Scroll down until you get to your district. And don't give up—it's a long list. (Individuals must complete credit counseling during the 180 days before filing for bankruptcy and a debt management course after filing the bankruptcy case.)

    Maine Bankruptcy Court Locations

    Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. You'll find the court's local rules and instructions for filing your case on the Maine bankruptcy court website. Here are the locations of the District of Maine's two divisions:

    Bangor

    Portland

    U.S. Bankruptcy Court
    District of Maine
    MC Smith Federal Building
    202 Harlow Street, 3rd Floor
    Bangor, ME 04401
    (207) 945-0348
    U.S. Bankruptcy Court
    District of Maine
    537 Congress Street, 2nd Floor
    Portland, ME 04101
    (207) 780-3482

    After Filing for Bankruptcy in Maine

    Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:

    • You'll turn over financial documents proving the statements in your bankruptcy paperwork.
    • You'll attend the 341 meeting of creditors—the one appearance all filers must attend.
    • You'll complete a debtor education course and file the completion certificate.

    These things all must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.

    Need More Help?

    You might not know this, but Nolo has been making the law easy for DIYers for over fifty years. If you have questions, use the links we've included throughout for more details. Otherwise, you'll find the answers to almost all of your bankruptcy questions at www.nolo.com/legal-encyclopedia/bankruptcy.

    Providing all information needed to file for bankruptcy is beyond the scope of this article. If you'd like to file without an attorney, consider buying a self-help book like How to File Chapter 7 Bankruptcy by Attorney Cara O'Neill and Albin Renauer J.D. to help you make well-informed decisions about your bankruptcy matter.

    Updated April 27, 2021

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