Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Maine, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. The homestead exemption in Maine allows individuals to exempt up to $160,000 of equity in their primary residence. This means that if the equity in your home does not exceed $160,000, it is protected from being sold to pay creditors in a bankruptcy case. For elderly or disabled debtors, the exemption amount may be higher. Additionally, Maine allows debtors to choose between state exemptions and federal bankruptcy exemptions, but they cannot mix and match between the two systems. The choice of exemptions can significantly impact the assets a debtor is able to retain post-bankruptcy. It's important to note that exemption amounts are subject to change, and debtors should consult with an attorney to understand the most current exemption limits and how they apply to their specific situation.