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Posted by: National Bankruptcy Forum
Minnesota isn’t just home to people with a well-known accent. It’s also home to the country’s largest urban sculpture garden in Minneapolis, the largest regional playhouse in the U.S., and Minneapolis boasts more golfers per capita than any city in the country. Minnesota also has 90,000 miles of beautiful shoreline, which is more than our friends in California, Florida, and Hawaii combined. The first Better Business Bureau also was founded in Minnesota in 1912.
Minnesota has a strong economy and a healthy population, which helped it rank as the third-best state in U.S. News and World Report in 2017. The state has 17 Fortune 500 companies, most of which are based in the Minneapolis-St. Paul region. The cost of living is relatively low while median household income is high, and there are good schools. That ranks Minnesota second for opportunity — based on the factors of economic opportunity, equality, and affordability — only after New Hampshire.
Despite all that good stuff, Minnesotans may still struggle with debt. An unexpected job loss or overwhelming medical bills can put anyone in a place of financial uncertainty. In many of these cases, turning to Chapter 7 bankruptcy may help Minnesotans find relief.
- Filing Chapter 7 Bankruptcy in Minnesota
- Minnesota Bankruptcy Exemptions: Can I keep my home and file bankruptcy?
- What about my car?
- Other Bankruptcy Exemptions under Minnesota Law
- Minnesota vs. Federal Exemptions
- Where are the Minnesota bankruptcy courts located?
Filing Chapter 7 Bankruptcy in Minnesota
Before we get into how Chapter 7 bankruptcy will help you keep your property and pay pennies on the dollar for your debt, you’ll want to know if you’re eligible to file for this chapter of bankruptcy protection. If not, there’s always Chapter 13, but most debtors will file Chapter 7.
To qualify for Chapter 7 bankruptcy in Minnesota, you’ll need to pass what’s called the means test. You must be below the median income for Minnesota at the time you file for Chapter 7, and your disposable income must not exceed certain thresholds. For cases filed Nov. 1, 2017, and later, the median income for a single-earner household in Minnesota is $53,474; for a family of two, it’s $72,734.
The test is based on your income in the past six months, so the timing of your case is important. For example, if you file for bankruptcy in February after just receiving a Christmas bonus six weeks prior, that will skew your income for the means test and make it look like you earn that amount the other six months of the year.
You’ll want to speak with a qualified Minnesota bankruptcy attorney who can help you determine your eligibility for Chapter 7 bankruptcy as well as other avenues to debt relief if you don’t qualify. This persona also will help guide you through the complex bankruptcy process; you won’t want to file bankruptcy alone.
Minnesota Bankruptcy Exemptions: Can I keep my home and file bankruptcy?
One of the best parts about Chapter 7 bankruptcy is the bankruptcy exemptions that will allow you to keep most, if not all, of your property. Bankruptcy exemptions “exempt” the equity you have in your property — how much you own outright — up to a certain amount. In some states, bankruptcy filers can choose between either the federal set of bankruptcy exemptions or the state’s exemptions; some are more generous than others. Minnesota is one of those states where you can choose either/or, but you can’t mix and match.
So, how does the Minnesota homestead exemption, for example, work in a Chapter 7 bankruptcy case? Let’s say that, due to overwhelming credit card debt, John from Minneapolis decides that bankruptcy will be his best option. John understands that he needs to file for bankruptcy; however, he’s concerned that he may lose his home. Based on a recent appraisal, the home is worth $250,000 and John owns it free and clear. Luckily for John, Minnesota’s generous $390,000 homestead exemption will allow him to file for bankruptcy, shed his credit card debt, and retain ownership of his home.
Keep in mind that if you have a mortgage, exempting home equity will not relieve the obligation to make payments after bankruptcy. In addition, a recent move may impact which state’s bankruptcy laws apply to your case.
What about my car?
Can you keep your car and file for bankruptcy in Minnesota? The answer will largely depend on three factors:
- Can you afford to maintain payments after bankruptcy?
- What is the value of your car?
- Has your car been modified due to a disability?
Maintaining Payments After Bankruptcy
Secured debts, such as car loans, need to be maintained after bankruptcy. Failure to make payments as usual can result in repossession. In most states, debtors will be required to sign a reaffirmation agreement if they wish to keep their car. In addition, you may want to discuss how Chapter 13 bankruptcy can lower your car payments when you meet with your attorney.
What is the value of your car?
Under Minnesota bankruptcy laws, debtors can protect up to $4,600 of equity in a single vehicle. Equity is determined by subtracting the amount of any loan from the blue book value of your car. If there is $4,600 or less after you run the numbers, your car will be classified as exempt, meaning the bankruptcy trustee can’t touch it. Even in the event equity exceeds $4,600, it is likely that your bankruptcy attorney can make a deal with the trustee to “buy-out” the non-exempt value of your car with a cash payment. Trustees don’t really want to sell your stuff — they are often willing to entertain settlement offers.
Has your car been modified due to a disability?
Minnesota bankruptcy laws significantly increase the car exemption to $46,000 in the event an automobile has been modified to accommodate a disability. If you have invested heavily in your car because of an illness, Minnesota law will likely shield the value of these improvements, allowing you to retain your car through the bankruptcy process.
Other Bankruptcy Exemptions under Minnesota Law
You probably don’t just have a car or a house, but other property you’d like to protect, like your jewelry, furniture, clothing, and cash. Here are a few popular Minnesota bankruptcy exemptions, in addition to how they stack up against federal bankruptcy exemptions.
You’ll see that if you live in Minnesota, you’ll most likely choose this state’s fairly generous exemptions.
Minnesota vs. Federal ExemptionsThe top 5 exemptions under Minnesota law compared to federal law.
|Type of exemption||Minnesota law||Federal law|
|Homestead||$390,000, or $975,000 if a farm||$23,675 of equity in principal place of residence|
|Personal property||Clothing and food, $13,000 in farm machinery and $11,500 in tools of the trade and livestock/crops, $10,350 in furniture and appliances; $2,817.50 in wedding rings||$12,625 aggregate value on household goods, plus federal wildcard exemption applicable ($1,250 plus $11,850 of any unused portion of your homestead exemption)|
|Vehicle||$4,600; up to $46,000 if modified for a disabled person||$3,775|
|Wages||75% gross weekly income, or 40 times the federal minimum wage||Income you've earned but not yet received becomes part of your bankruptcy estate|
|Pension/retirement||$69,000 in employee payments, current or future, toward pensions, stocks, and retirement plans||Exempt, with a cap of about $1.28 million on IRAs and Roth IRAs|
As discussed in our example earlier, Minnesota has one of the best homestead exemptions in the country. Only a few states allow for complete exemptions of a residence, but Minnesota may come pretty close for a lot of people. Although the homestead exemption cannot be doubled if married, Minnesota law protects up to $390,000 equity in your home; if you own and operate a farm, that number increases to $975,000. Proceeds from the sale of your home, up to the maximum exemption amount, also would be protected for up to a year after the sale, in addition to insurance proceeds for home damage. Minn. Stat. § 510.01, 510.02
If you own one of those cute “tiny homes,” considered a manufactured home under Minnesota law, it’s fully exempt if it meets specific standards. Minn. Stat. § 327.31.6
If you farm, you can exempt $13,000 in farm machinery and another $11,500 in farm implements, livestock, produce, or crops. Additional personal property exemptions include: $10,350 in furniture, appliances, TVs, and radios; all clothing, one watch, food, and utensils; wedding rings up to $2,817.50 in value; teaching books; and a burial plot or church pew/seat. Minn. Stat. § 550.37 subds. 3-8
As mentioned, you may exempt your vehicle up to $4,600 in Minnesota. If at least $3,450 in modifications for a disabled person have been performed on a vehicle, you can exempt up to $46,000. Minn. Stat. § 550.37, subd. 12a
Up to 75% of gross weekly earnings, or 40 times the federal minimum wage, whichever is greater, are exempt. Minn. Stat. § 550.37, subd. 13
Many retirement plans are protected under federal non-bankruptcy exemptions, but Minnesota law also offers some protection for employee benefits, insurance benefits, and other assistance. Up to $69,000 of current or future employee payments under a stock, bonus, pension, profit-sharing, IRA, Roth IRA, and other plans on account of length of service, age, illness, disability, or death, plus any additional amount as reasonably necessary. Minn. Stat. § 550.37, subd. 24
Where are the Minnesota bankruptcy courts located?
Minnesota bankruptcies are filed with the District of Minnesota, United States Bankruptcy Court. There are four court locations where you may present your bankruptcy case for filing. Your section 341(a) meeting of creditors could be in various locations.
Fergus Falls: 204 Edward J. Devitt United States Courthouse and Federal Building, 118 S. Mill St., Fergus Falls, MN 56537