Maine Bankruptcy Exemptions
Bankruptcy is a complex subject and filing for bankruptcy can be an even more complex situation. Most people often wonder that if they file for bankruptcy, does that mean that the lose all of their assets? The answer to that question is no. When filing for bankruptcy, there is a certain minimum level of assets that are protected from creditors. These are called bankruptcy exemptions.
Bankruptcy exemptions allow you to leave bankruptcy with certain assets that are protected from creditors. These exemptions were created so that you do not have to start from scratch after getting out of debt. If we didn’t have bankruptcy exemptions then you would have to obtain loans or other forms of credit to get back on your feet, which defeats the purpose of filing for bankruptcy in the first place. In Maine, you receive the same amount of protection from creditors for federal and state purposes. You can find Maine’s general exemption scheme at 14 M.R.S.A. Sec. 4422.
Here is a sampling of some of the items protected by Maine’s bankruptcy exemptions:
- $47,500 in equity in your personal residence, which increases to $95,000 if you are over 60 years old; if you are married and you both own the home jointly then that amount is doubled.
- $5,000 in equity in one motor vehicle.
- $200 in equity per item in any household goods or clothing; if you are married and jointly own the property than you can exempt up to $400 per item.
- $750 in jewelry; an unlimited amount in your wedding band or engagement ring.
- $5,000 in equity in a debtor’s tools of the trade (i.e. assets used in a business).
- An amount “reasonably necessary for the support of the debtor and any dependent of the debtor” in a retirement plan or IRA.
Exemptions are not automatic and you need to properly claim them on your bankruptcy petition. Schedule C of the bankruptcy petition provides space for you to claim an exemption in your assets. It is very important that you claim the proper amount of the exemption and point to the relevant exemption provisions or you might face a challenge by the bankruptcy trustee.
If you are filing for bankruptcy, you should always plan out your exemptions. We call this exemption planning. Exemption planning is just analyzing your situation for opportunities to maximize your exemptions, so in a nutshell, exemption planning is just moving your assets from one bucket to another to keep it from your creditors. You should always speak with a qualified bankruptcy attorney if you need to protect non-exempt assets from creditors.
This was just a quick summary on Maine bankruptcy exemptions but if you are looking to file for bankruptcy, you should consider James D. Wade. He is a qualified business and bankruptcy attorney. He will help you fight through your business or tax needs while keeping your best interest in mind. To learn more, visit at www.jdwadelaw.com.