Maine Bankruptcy Exemptions and Law

Bankruptcy helps people address often overwhelming debt. While your home may be sold to pay off creditors, that’s not usually the case. A bankruptcy trustee may order the sale of your home and other property to pay off your debt, but there’s no guarantee it will happen. Maine offers debtors “bankruptcy exemptions” that help protect the equity in their primary residence, motor vehicle, and other personal property.

This article explains how these exemptions work and how they can help protect your property during the bankruptcy process. You’ll learn the specific exemption limits for items like your house, personal property, and other assets.

Whether you plan to file Chapter 7 or pursue a reorganization bankruptcy, it’s a good idea to consult a Maine bankruptcy attorney. Discussing your Chapter 7 or Chapter 13 case with a skilled lawyer familiar with the bankruptcy laws in the district of Maine can ensure you receive all of the protections you’re entitled to.

Maine Bankruptcy Law

Maine bankruptcy laws are designed to protect you as much as possible during a filing. Understanding how the bankruptcy process works and what to expect is important.

Bankruptcy 101

Deciding to file bankruptcy isn’t easy. Opting for a bankruptcy case is stressful, and you can’t be certain which of your assets you’ll be able to keep. The two most common types of bankruptcy are Chapter 7 and Chapter 13. A Chapter 7 bankruptcy case is often called a liquidation bankruptcy. You include all your debts with the intention of having the bankruptcy judge discharge them.

Once your Chapter 7 bankruptcy is complete, you’ll no longer owe money to the creditors you included in your bankruptcy petition. You’ll get a fresh start, though it will negatively affect your credit rating. Within a year or two, you should be able to slowly build new debt.

A Chapter 13 bankruptcy is a different undertaking. Chapter 13 bankruptcy case is a reorganization bankruptcy. Instead of discharging your secured and unsecured debts, a Chapter 13 bankruptcy involves a three-to-five-year repayment plan.

Once you file your Chapter 13 petition, your bankruptcy trustee will review your debts and assets to confirm that you meet the eligibility requirements for Chapter 13. You’ll create a repayment plan for your creditors, who may object. If the judge believes your repayment plan is fair and that you can afford the monthly payments, it’s likely to be approved. Once this happens, you will start making monthly payments to the trustee, who will then disburse them amongst your secured and unsecured creditors.

Chapter 7 Bankruptcy Proceedings

The bankruptcy process is different for Chapter 7 and Chapter 13 cases. Each has a different goal. Let’s start with Chapter 7.

You must take the appropriate steps to file your Chapter 7 bankruptcy. If you don’t file the correct paperwork, the court will reject your petition, and you’ll have to resubmit your petition. Unless you’re familiar with bankruptcy law, speaking with a Maine bankruptcy lawyer before you file anything with the court is a good idea.

The filing fee for a Chapter 7 in Maine is $338. If you make less than 150% of the poverty line, you can request a fee waiver.

One immediate benefit of filing bankruptcy is that the automatic stay kicks in when you file your bankruptcy petition. The automatic stay serves as a grace period during which lenders cannot pursue debt collection efforts or threaten foreclosure or repossession.

Under Section 362 of the U.S. Bankruptcy Code, the automatic stay immediately puts a stop to adverse actions such as:

• Repossession
• Civil lawsuits
• Foreclosure
• Wage garnishment
• Levies on your bank accounts
• Eviction
• Collection action

You must include your debts on your Schedules D, E, and F. These schedules include the following information:

• Schedule D: Secured creditors, such as your mortgage company or auto lender
• Schedule E: Unsecured creditors with a priority claim, such as tax debts, child support, and student loans.
• Schedule F: Unsecured creditors without priority, such as credit card and medical bills

If you don’t include a creditor in your bankruptcy petition, they will not receive notice of your bankruptcy and will not be subject to the automatic stay.

The automatic stay is usually the first thing that happens in a bankruptcy. Debt discharge (debt forgiveness) usually comes last. The bankruptcy court typically only discharges unsecured debts, such as:

• Medical bills
• Credit card debt
• Revolving charge accounts
• Payday loans
• Personal loans
• Utility bills
• Signature loans

Once a debt is discharged, you no longer owe it. If a creditor tries to collect a debt discharged in bankruptcy, you may have legal recourse.

Chapter 13 Bankruptcy Proceedings

Chapter 13 is a little more complex than Chapter 7. You still start by filing, but then the process becomes much more complicated.

The filing fee for a Chapter 13 bankruptcy is $313. The courts rarely, if ever, waive this fee. However, you can request to pay the fee in installments when you file your bankruptcy petition.

The automatic stay also applies to Chapter 13 bankruptcy cases. It goes into effect when you file a Chapter 13 bankruptcy petition. Creditors are then prohibited from pursuing collection action against you.

When reviewing your Chapter 13 bankruptcy petition, the trustee will look closely for things like fraudulent conveyances (of property) and possible preferences for certain creditors. Once the trustee is confident that you included legitimate debts and provided truthful information, they’ll review the proposed repayment plan you submitted with your petition. If the trustee accepts your plan as reasonable and feasible, they will schedule the 341 Meeting of Creditors.

Your creditors have the right to object to the plan at the meeting. They must submit verified, legitimate reasons why the plan is unfair. This is uncommon. In most cases, unsecured debt creditors must accept the income-based repayment plan. They can’t pressure Chapter 13 bankruptcy debtors to pay more money or pay it faster.

Once the judge approves your Chapter 13 plan, you start making monthly payments to the trustee. The trustee will deduct a portion of your payment as a fee and distribute the rest to your creditors according to the plan. As long as you make your payments on time, your bankruptcy will be complete at the end of your plan. The court will discharge some of your debts and, for the non-dischargeable debts, you will resume paying them as you did before the bankruptcy. While Chapter 13 will also negatively affect your credit rating, it’s not as severe as under a Chapter 7.

Am I Eligible for Bankruptcy in Maine?

Not everyone will qualify for bankruptcy. Both types have requirements you must meet.

Qualifying for Chapter 7 in Maine

To qualify for a Chapter 7 bankruptcy, you must pass a “means test.” You’re required to prove that you earn less than your state’s median household income. For the year 2026, the annual median income for a two-person household in Maine is $90,445. For a four-person household, this number increases to $131,577. You must fall below this line to qualify for a liquidation bankruptcy.

If you pass the first test (median income test), you can proceed with your bankruptcy filing. If your income is above the state’s median income level, you can still qualify for Chapter 7 bankruptcy by showing that your disposable income is less than the statutory limit. You can calculate your disposable income by subtracting your allowable household expenses and secured debt payments from your net income. What remains is your disposable income. If you pass the disposable income test, the bankruptcy court will process your petition and assign it to a trustee.

Qualifications for a Chapter 13 Bankruptcy Case in Maine

Qualifying for a Chapter 13 case is more complicated than for Chapter 7 cases. Knowing what’s required can help you decide which type is best for you.

To qualify for Chapter 13 bankruptcy in Maine, you must meet the following criteria:

• You have sufficient regular income to make payments under your Chapter 13 repayment plan
• Your unsecured debt is less than the maximum limit of $526,700
• Your secured debt falls below the limit of $1,580,125
• You completed a mandatory credit counseling course within 180 days of filing your Chapter 13 bankruptcy petition
• You did not have a previous Chapter 13 bankruptcy case dismissed within the last 180 days for failure to appear or failure to abide by a court order.
• You submit a proposed repayment plan

If you meet these requirements, the bankruptcy court should accept your petition.

Maine Bankruptcy Exemptions

Although all bankruptcy cases take place in federal bankruptcy court, states often have their own bankruptcy laws. These can include bankruptcy exemptions.

In some states, debtors can choose between federal and state exemptions. For example, if the federal homestead exemption of $31,575 is greater than your state’s homestead exemption, you may select the federal exemption.

Maine doesn’t allow this option. If filing a bankruptcy petition in the state, you must use the Maine exemptions. This applies to the homestead exemption and all other property exemptions. To claim the Maine exemptions, you must have lived in the state for at least two years before filing for bankruptcy.

Specific Bankruptcy Exemptions in Maine

Bankruptcy exemptions help protect a debtor’s property in bankruptcy and apply in both Chapter 7 and Chapter 13 cases. The only exemptions available to you are the Maine exemptions, which include the following:

• House: Maine’s homestead exemption protects up to $80,000 of home equity. This number increases to $160,000 if you are over 60, have a disability, or have minor children living in the home.
• Motor Vehicle: $10,000 of the equity in your motor vehicle is protected under Maine law. Most debtors manage to keep their cars because they owe more than the car is worth. However, if you own your car outright or have significant equity in your car or SUV, you can protect up to $10,000.
• Personal property: Under Maine law, debtors can protect up to $500 per item of household goods, clothing, and appliances. These exemptions also apply to animals, musical instruments, books, and other personal property.
• Jewelry: Maine residents can claim up to $1,000 in jewelry exemptions. State law also offers a $4,000 exemption for combined wedding and engagement rings.
• Tools of the Trade: The Maine exemption for “tools of the trade” is $9,500. This exemption protects any tools, supplies, and equipment you need to run your business or support your employment.
• Wildcard: Debtors may use this exemption to protect up to $500 of otherwise nonexempt property. They can also apply up to $10,500 of their unused homestead exemption to protect property not covered by another exemption.

These exemptions can help you retain some of your treasured assets.

Contact a Maine Bankruptcy Attorney for Help With Your Bankruptcy Case

If you’re thinking about filing bankruptcy but aren’t sure, contact an experienced Maine bankruptcy attorney. They’ll explain your options and show you the exemptions you can claim in your bankruptcy case. Navigating the bankruptcy process can be challenging. Having a lawyer by your side can make it easier and less stressful. They’ll also ensure that you get every exemption and protection you’re entitled to.