A Brief Introduction to Maine State Bankruptcy Law
Before Filing for Bankruptcy
The United States government has mandated that all citizens complete a credit counseling session before they can file for personal bankruptcy. The purpose of this is to insure that Maine bankruptcy is the last and best option available to them. For a list of Justice Department-approved counselors, visit this page.
Also, keep in mind that all businesses must have legal representation to file. Individuals don’t need this, but many choose to have some anyways. If you are unable to afford a Maine bankruptcy lawyer, pro bono services such as the Maine Volunteer Lawyer Project may be able to help you at little or no cost.
Filing for Bankruptcy
The state of Maine has two courts where you can file for bankruptcy, in Bangor and in Portland. You are also able to mail in petitions. Remember that petitions need to pay a large fee to file for bankruptcy, $306 for Chapter 7, $1046 for Chapter 11, and $281 for Chapter 13. Come to the court with those fees ready to be paid and all appropriate forms filled out. You can find all local forms on this site and all federal forms here. To know which forms to fill out, you have to know which type of bankruptcy you plan on filing for. Learn more about the different kinds below.
Corporate Maine Bankruptcy
If a careful analysis of your company’s finances seems recommend bankruptcy, then these are the options available to you:
• Chapter 11 Maine Bankruptcy: The State of Maine recognizes that even if a company has trouble in the short-term keeping up with their bills, that doesn’t mean the company isn’t fundamentally sound. Chapter 11 bankruptcy assists struggling Maine businesses by protecting them from debt collectors while their corporate structure is reorganized and a new debt payment schedule is devised.
• Chapter 7 Maine Bankruptcy: Chapter 7 is in many ways the flip side of Chapter 11, which is for businesses that hope to soon be profitable. Chapter 7 is intended for companies that are unlikely to ever generate enough revenue to pay off their debt or even to continue operations. While businesses keep operating during Chapter 11, they shut down during Chapter 7 while the court liquidates a company’s assets to give money to creditors. After Chapter 11, companies can potentially reemerge stronger, but after Chapter 7, a company is still liable for any debt still owed, so reemergence is very unlikely.
Personal Maine Bankruptcy
The Maine and federal government offer legal solutions to help return a person’s finances to a state of calm.
• Chapter 7 Maine Bankruptcy: Although typically a death knell for a business, Chapter 7 can be a highly positive and productive turn for an individual. Since many people own few assets, they have little to lose, and the court promises to absolve them of all unsecured (mainly credit card) debt, no matter how few funds are raised through the asset liquidation. The one drawback, besides the normal hesitations that come with all forms of Maine bankruptcy, is that only certain individuals are eligible—those earning less than the Maine mean and those who pass the Maine Means Test.
• Chapter 13 Maine Bankruptcy: As with Chapter 11, Chapter 13 Maine Bankruptcy is a restructuring program intended to help an individual’s pay off their debt alone. This is done by taking money from a person’s income every month and putting it toward debt payment. The person is usually resolved of debt within five years.
The Tax Debt Dilemma
It’s not uncommon for individuals to land in financial trouble because of tax debt. Unfortunately, for them Maine bankruptcy law has little to offer. No state’s bankruptcy laws are equipped to deal with most tax situations, so usually the best choice of action is to seek a resolution with the IRS.