A bankruptcy exemption refers to a particular asset that a person who files for bankruptcy will be allowed to keep because the asset is recognized as a necessity under various bankruptcy laws. While many bankruptcy exemptions are listed in the federal U.S. Bankruptcy Code, each state also has its own exemption schedule that provides which items of property a debtor may hold on to after filing for bankruptcy. 

In addition to reviewing federal and state bankruptcy property exemptions, a debtor will need to check the requirements for property exemptions for the chapter of bankruptcy they are filing as well. This is because property exemptions can vary based on the type of bankruptcy being declared, which in turn, will affect what assets the debtor will be permitted to keep. 

For instance, the guidelines for Chapter 7 bankruptcy exemptions specify which assets a debtor is allowed to remain in possession of and what items can or must be sold to pay off the creditors. On the other hand, the guidelines for Chapter 13 bankruptcy exemptions focus on the amount of money that a debtor may need to give to unsecured creditors. 

Basically, the concept of bankruptcy exempt properties can be summed up as any property and/or assets that are off limits to creditors and cannot be used to satisfy a borrower’s debts. In contrast, property and/or assets that can be seized by creditors in order to pay off a borrower’s debts is known as “non-exempt” property. Again, property exemptions may differ by state and by the kind of bankruptcy case. 

To learn more about the requirements for bankruptcy property exemptions in your state, it may be in your best interest to contact a local bankruptcy lawyer for further guidance.

What Are the Maine Bankruptcy Exemptions?

According to the federal U.S. Bankruptcy Code, every state has discretion to decide which property and/or assets will be exempt after a debtor files for bankruptcy. Under the law, a state may either draft its own list of bankruptcy property exemptions or the state may give a debtor the option to choose between the federal or their state’s property exemptions. 

In states that provide both options, the debtor must choose which set of exemptions to follow. They cannot mix and match from different sets (e.g., state vs. federal exemptions).

Maine bankruptcy laws, however, require that a debtor comply with its own list of property exemptions. In particular, any debtor who has lived in Maine for at least two years by the time they file for bankruptcy, must ignore all federal bankruptcy exemptions and only abide by the state list.

As of 2020, some current bankruptcy property exemptions in Maine include the following:

  • Homestead exemption: In Maine, a debtor can protect a certain amount of equity that they have in property that is used as a residence (i.e., home). 

    • A debtor may be able to protect up to $47,500 in value of real or personal property used as a dwelling. This amount also includes co-op property and/or already purchased burial plots. 
    • If a debtor resides with a minor, a dependent who is physically or mentally disabled, or if the debtor or their dependent is 60 years of age or older, they may be able to get up to $95,000 exempted. 
  • Equity in automobile exemption: This is a very specific exemption that applies to only one motor vehicle for up to $7,500. 
  • Personal property exemptions: The debtor may protect up to $200 per item, such as household goods, clothing, appliances, books, animals, crops, musical instruments, and so forth, as well as up to $750 worth of jewelry held for the debtor, family, or the debtor’s household use and the debtor’s interest in a wedding and/or engagement ring. 
  • Tools of the trade exemptions: Tools of the trade, such as books, inventory, and actual tools, may be protected for up to $5,000 in value. Also, under similar exemptions, the debtor may be able to claim things like food, furnaces, produce, a fishing boat, and farm equipment as exempt. 
  • Insurance exemptions: Any unmatured life insurance contracts (except credit life insurance contracts), and life insurance dividends that do not exceed the value of $4,000 may be exempt, along with certain life insurance loans or interest. 
  • Pensions and retirement benefit exemptions: Retirement funds that are exempt from taxation may be protected for up to a collective value of $1,000,000 (unless funds were contributed within 120 days prior), payments from a pension or other plan that pays out based on age, illness, disability, death, service years, etc., and ERISA support benefits may all be exempt. 
  • Public benefit exemptions: Benefits, such as disability, social security, unemployment, and federal income tax credits may be exempt. 
  • Alimony and child support exemptions: Maine is more relaxed in their exemptions for alimony. Basically, anything that is reasonably necessary in order to make alimony and/or child support payments may be exempt. 
  • Miscellaneous exemptions: Some other exemptions may include property of a business partnership (e.g., limited or general partnership), crime victims’ reparation awards, loss of future earnings awards, awards for wrongful death suits, and up to $12,500 in damages for a personal injury lawsuit. 
  • Wildcard exemptions: A wildcard exemption may apply to an unused residence for up to $6,000, including an exemption for certain items of property (e.g., crops, musical instruments, animals, appliances, jewelry, tools of the trade, furnishings, home goods, appliances, books, clothing, etc.); and for personal property of up to $400.

If after reviewing local laws a debtor is still unsure about which items of property and/or assets qualify for exemption, they should speak to a Maine bankruptcy lawyer immediately. This is especially true in cases where a married couple is filing for bankruptcy because the amounts in the above list may be higher for certain assets. 

A lawyer will be able to provide more information on these requirements as well as can assist a debtor in properly claiming and calculating property exemptions. Additionally, a debtor filing for bankruptcy in Maine will also need to know which special federal exemptions requirements may apply since Maine allows for a few federal law exceptions. 

What if I Have a Dispute or Conflict Regarding Bankruptcy Exemptions? 

In some cases, there may be a dispute or conflict over a particular bankruptcy exemption. For instance, a creditor or bankruptcy trustee may file an objection when they do not agree with the way a debtor classified their property under the applicable exemption laws. 

As an example, suppose a trailer or boat loosely qualified for the homestead exemption. The debtor uses this exemption to remove the property from a creditor’s reach. The creditor does not believe the property fits the parameters of this exemption and does want to miss their chance to recoup funds. So, the creditor objects. 

Another issue that frequently comes up in regard to bankruptcy exemptions is when a creditor or the trustee thinks that a specific property is worth more than what the debtor lists in their bankruptcy petition.

In either case, the trustee or a creditor must file an objection of the exemption within 30 days from the date of the 341 meeting. They also must serve notice on the debtor. Failure to comply with either requirement may result in a loss of opportunity to prove their case. It is important to note, however, that a court may extend the time that a creditor or the trustee has to file the objection.

On the other hand, the debtor will need to provide evidence that shows their decisions were proper. For example, if a creditor claims a certain item of property is worth more than the debtor issue claiming, the debtor should submit receipts or credit card statements that display the actual value of the item. 

In cases that require a court to settle an issue, the debtor may also have their property appraised or hire expert witnesses to provide testimony on property values.

Do I Need a Maine Bankruptcy Lawyer?

In general, filing for bankruptcy requires a thorough understanding of complex laws and intricate legal procedures. Property exemptions, which make up a substantial portion of the filing stage, are one of the most confusing parts of this process. They also happen to be one of the most important parts as well, since improperly claiming an exemption or leaving out an exempt property can result in a seizure of those assets.

Additionally, the bankruptcy laws in Maine can make property exemptions even more complicated due to the fact that it has requirements that differ from other states and federal laws. 

Thus, if you need assistance with filing for bankruptcy or have any questions regarding bankruptcy property exemptions in Maine, you should consult a local bankruptcy lawyer for further advice.  

Your lawyer will be able to answer any questions you may have about filing for bankruptcy and can review the types of properties that may qualify for an exemption based on the chapter of bankruptcy that you chose to file. Your lawyer can also confirm that your assets are properly divided for exemption purposes and can help you to protect certain assets. 

Finally, your lawyer can also attend the 341 meeting with you if you wish and can represent you in bankruptcy court if necessary.