PORTLAND – Finest Hearth Inc. has closed its stores and is liquidating its business.

The company, which ran Finest Hearth and Home stores in Portland, Yarmouth and Topsham, filed a voluntary petition for Chapter 7 bankruptcy on Monday. The company’s assets were estimated at $1.3 million and its liabilities were estimated at $2.2 million in documents filed in U.S. Bankruptcy Court.

Neither the company’s president, James Steffensen of Cumberland, nor its lawyer, Jacob Manheimer of Pierce Atwood, could be reached for comment. The bankruptcy petitions said the company’s gross sales fell from $5 million in 2009 to $3.2 million in 2010.

The hearth products industry faces challenges despite a consumer tax credit that encouraged sales of wood and pellet stoves last year, said Leslie Wheeler, communications director for the Hearth, Patio and Barbecue Association.

The 30 percent tax credit, good for as much as $1,500, expired at the end of 2010. The 2011 tax credit is for 10 percent of the price, with a limit of $300.

Shipments of pellet stoves from manufacturers to retailers were up 161 percent in 2008, but fell 67 percent in 2009, according to the trade group. Shipments of cordwood stoves were down 5 percent in 2008 and fell 32 percent in 2009. Figures for 2010 are not yet available.

“It was a tough ’09-’10. … We saw it across the country,” Wheeler said. “We saw the improvement late in the year — clearly too late for Finest Hearth.”

Finest Hearth’s unsecured creditors include more than 200 customers who paid deposits for products, ranging from about $10 to almost $10,000. In all, they paid $451,201, of which $330,036 has priority status as the company’s assets are liquidated and creditors are paid off. The priority figure for an individual is capped at $2,600.

Carole Ryder of Cumberland was among the customers who were motivated by the 30 percent tax credit. With an aging wood stove and oil furnace at home, Ryder ordered a pellet stove for $3,307 from Finest Hearth’s Yarmouth store on Dec. 18.

She called the installer on Jan. 6 and learned that he and the other employees had been let go the previous night. She immediately canceled her $800 order for pellets and called her credit card company.

Ryder is angry about losing the tax credit, but said she could have been fared worse. She believes the credit card company will get her money back.

Finest Hearth’s roots go back to 1974. Finest Hearth and Home was formed through the merger of Black Stove Shops and Finest Kind in 2005. At the time, the business also had stores in Lewiston, Augusta, Waterville and Bangor.

In addition to pellet and wood stoves, the stores sold fireplace inserts, patio furniture and grills.

The company is owned by S3 Acquisition Co. LLC, in which Steffensen holds a 69.15 percent interest.

Staff Writer Ann S. Kim can be contacted at 791-6383 or at:

akim@pressherald.com