What Are the Maine Bankruptcy Exemptions?

What Are the Maine Bankruptcy Exemptions and Why Are They Important in a Chapter 7 Bankruptcy? 

If you’re thinking about filing for Chapter 7 bankruptcy in Maine, it’s important to understand the concept of bankruptcy exemptions, as this will help you to keep your personal property, even though you can’t pay your creditors what you owe them.

When an individual files for Chapter 7 relief, the bankruptcy court appoints a trustee to their bankruptcy case. That bankruptcy trustee is empowered to sell the filer’s non-exempt property so that the individual’s creditors can benefit from the profits of the sale. When a filer applies Maine's bankruptcy exemptions to their property, they protect that property from the risk that it will be sold by their trustee. Essentially, bankruptcy filers can keep fully exempt property. It can’t be taken away by the bankruptcy court.

Does Maine Allow the Use of Federal Bankruptcy Exemptions?

Maine doesn't allow its residents to use federal bankruptcy exemptions at this time. While 17 states do allow most residents to choose between their state’s bankruptcy exemption structure and federal exemptions, Maine is one of the 33 states that requires residents to use Maine exemptions only. This means that if you’re filing for Chapter 7 bankruptcy in Maine, as long as you’ve lived in the state for a minimum of two years, you’ll only be applying Maine bankruptcy exemptions to your property (except where state bankruptcy law allows for the limited use of very specific federal exemptions as add-ons).

Maine Bankruptcy Exemptions

When assessing the Maine bankruptcy exceptions noted below, please keep in mind that if you are filing bankruptcy jointly with your spouse, you are each entitled to a full set of bankruptcy exemptions. This means that unless otherwise noted, the bankruptcy exemption values available to you are doubled.

For example, a single filer is entitled to a $400 “wildcard exemption” that allows them to protect property that cannot be exempted elsewhere. By contrast, a married couple filing jointly is allowed to claim a wildcard exemption worth up to $800 in aggregate value, as their exemption values are automatically doubled unless otherwise noted.

Real Property — The Maine Homestead Exemption

If you’re single and have no qualifying dependents, Maine law allows you to exempt up to $47,500 worth of equity in your home or other real estate used as your primary residence. This equity amount doubles if you have minor dependents who live with you. Similarly, if you have adult dependents who are mentally or physically disabled and are therefore unable to maintain gainful employment or are at least 60 years of age. Note that Maine law also allows you to apply this exemption amount to a burial plot.

Personal Property Exemptions

Maine’s personal property exemptions tend to be specific, rather than general. Meaning that instead of insisting that “jewelry is exempt,” state law allows for a $750 exemption in jewelry value generally with no limit imposed on the value of one wedding ring and one engagement ring. This is why it's important to pay attention to the particulars of the exemptions available. You may need to pick and choose which property to exempt under the category limits and which to cover with a wildcard exemption or other exception to ordinary value limits imposed by the law for each category of property.

In addition to the jewelry exemption noted above, the following personal property exemptions are allowed under Maine law. Unless otherwise noted, the full value of the property in question is exempt:

• Animals (up to $200 in value for each item)

• Books (up to $200 in value for each item)

• Clothes (up to $200 in value for each item)

• Commercial fishing boat (one; the fishing boat may not exceed 5 tons burden)

• Commercial wood hauling equipment (one of each type of professional logging equipment required to harvest and haul wood commercially)

• Cooking Stove (one)

• Crops (up to $200 in value for each item)

• Farm equipment

• Food provisions to last up to six months

• Health aids (professionally prescribed for filers or their minor dependents)

• Heating aids (5 tons of coal, 10 cords of wood, and 1,000 gallons of petroleum for family use)

• Household goods, household furniture, and appliances (up to $200 in value for each item)

• Musical instruments (up to $200 in value for each item)

• Tools of the trade (up to $5,000 in value)

• Wood stoves

Additionally, filers may exempt up to $5,000 in equity interest in one motor vehicle. If a vehicle isn’t owned outright, this interest is calculated using the difference between the vehicle’s value and the outstanding loan value amount. For example, if a car is valued at $8,000 but the filers still owe $4,000 on the loan, they can exempt the $4,000 in value that they have invested in the vehicle. 

Finally, if you did not use the total homestead exemption available to you, you can use up to $6,000 of the remaining unused homestead exemption to protect additional interest in tools of the trade, household goods, household furniture, appliances, and personal injury awards (which are discussed below).

Money Benefits

Maine does not offer a wage exemption. Meaning, if you have money in the bank from wages you’ve recently earned, these are not explicitly exempt. However, you can use some of the unused homestead exemption remainder (up to $6,000) outlined above to safeguard unspent wages.

By contrast, Maine offers a very generous pension and retirement exemption structure. Essentially, any pension and/or retirement accounts that are deemed to be reasonably necessary to support you or your dependents are exempt. It's rare that low-income filers' retirement accounts are deemed to be so excessive as to be treated as nonexempt property. For example, up to $1,000,000 in value in an individual retirement account is explicitly exempt. Therefore, it is unlikely that low-income Chapter 7 filers have access to pension or retirement funds so extreme that the court would not exempt them.

Unless noted otherwise, the following additional “money benefits” are exempt up to their full value under Maine law:

• Alimony or spousal support

• Annuity proceeds (not to exceed $450 monthly)

• Child support

• Child tax credit

• Crime victim reparation

• Death benefits granted to family members of first responders who lost their lives in the line of duty

• Disability or illness benefits

• Earned income tax credit

• Fraternal benefit society benefits

• Group health or life policy or proceeds

• Life insurance payments tied to the loss of your spouse (reasonable to the extent necessary to support you and your children)

• Loss of future earnings award (reasonable to the extent necessary to support you and your children)

• Personal injury recoveries (up to $12,500, with no limitations placed on pain and suffering awards and awards for actual monetary loss)

• Public assistance benefits

• Social Security benefits

• Stock bonus, profit shares, annuity, pension, or a similar plan/contract on account of age, death, disability, illness, or length of service (reasonable to the extent necessary to support you and your children)

• Tax-exempt retirement accounts (including 401(k)s, 403(b)s, defined benefit plans, money purchase plans, profit-sharing plans, SEP and SIMPLE IRAs)

• Unemployment compensation

•  Unmatured life insurance contract, matured life insurance contract, dividends, interest, or loan value for someone you depended on for support insuring you or your minor dependents – (up to $4,000)

•  Veterans benefits

• Wrongful death recovery award for the death of your spouse, reasonable to the extent necessary to support you and your children

Other Maine Exemptions

Maine law honors a wildcard exemption that allows filers to safeguard an additional $400 in value for property that is not exempted by any other provision in the state’s bankruptcy laws.

Filing Chapter 7 Bankruptcy? 

Filing for Chapter 7 bankruptcy isn’t the best option for everyone. In fact, not all households are even eligible to file for bankruptcy under this chapter of the Bankruptcy Code. If you own a lot of valuable property and/or you earn a decent income, you may want to consider filing for Chapter 13 bankruptcy instead.

Regardless of which option you choose, please remember that most bankruptcy attorneys offer free consultations that you can take advantage of at any time. Speaking with a Maine bankruptcy lawyer will help to ensure that you can make an informed decision about your situation. Upsolve can help you to find a qualified bankruptcy attorney in your area who will be happy to offer you valuable legal advice. If you’d like to save money by filing for Chapter 7 bankruptcy without a bankruptcy attorney, know that Upsolve may be able to help you file for free.