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Bankruptcy: Minnesota

Filing bankruptcy in Minnesota not only gives honest debtors an opportunity to recover from debt, but also repays creditors to the extent that a debtor’s property value or earnings permit. 22,074 bankruptcies were filed in Minnesota in 2010, ranking Minnesota 28th in the country for the number of bankruptcy filings per capita. 87% of Minnesota’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in Minnesota

Federal law governs bankruptcy proceedings in Minnesota, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in Duluth, Minneapolis and St. Paul.

Although the federal courts have exclusive jurisdiction over bankruptcy proceedings, Minnesota law allows petitioners to use the exemptions listed in the U.S. bankruptcy code or the exemptions provided under Minnesota law. The exemption systems cannot be mixed and matched; petitioners must use one or the other. With the guidance of a bankruptcy attorney Minnesota petitioners can gain a full understanding of what personal property they are permitted to keep in bankruptcy and what must be sold.

Chapter 7 Bankruptcy, Minnesota

Chapter 7 bankruptcies in Minnesota are the most common bankruptcy filing.  Chapter 7 is best suited for petitioners who do not have major assets such as financial investments or substantial equity in a home, for the reason that a Bankruptcy Trustee may liquidate personal property that is not protected by Minnesota’s bankruptcy exemptions. Liquidation happens when a court-appointed Trustee converts personal assets to cash for distribution to creditors. Minnesota’s Chapter 7 bankruptcy law allows debtors to retain some essential property and these exempt assets are off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

Minnesota Bankruptcy Exemptions

Minnesota bankruptcy law assigns defined property exemptions permitting debtors to keep specific personal property and assets so bankruptcy proceedings do not leave them washed up.  In real terms, this means creditors cannot force debtors to sell the shirt off their back to settle outstanding debts.  Bankruptcy in Minnesota lets petitioners choose exemptions from the federal or state lists, but not both.

Because property exemption values change; individuals or couples entering bankruptcy proceedings ought to visit a Minnesota bankruptcy attorney to learn which exemptions are applicable to their situation.  Minnesota bankruptcy exemptions include:

Minnesota Homestead Exemption

  • Manufactured home to an unlimited value
  • $360,000 total: Home and land on which it is situated; if homestead is used for agricultural purposes, $900,000; cannot exceed 1/2 acre in city, 160 acres elsewhere (Husband and wife may not double)

Minnesota Personal Property Exemption

  • $9,900 total: Appliances, furniture, jewelry, radio, phonographs and TV
  • $4,400 total: Motor vehicle; $44,000 total if vehicle has been modified for disability
  • $2,695 total: Wedding rings or symbols
  • Clothing, one watch, food and utensils for family
  • Bible and books
  • Personal injury recoveries
  • Proceeds for damaged exempt property
  • Burial plot; church pew or seat
  • Wrongful death recoveries

Minnesota Tools of the Trade Exemption

  • Teaching materials of college, university, public school, or public institution teacher
  • $11,000 total: Tools, machines, instruments, stock in trade, furniture and library
  • $13,000 total: Farm machines, implements, livestock, produce and crops
  • $13,000 total: Value of Tools of Trade and Farm Machines combined

Minnesota Wage Garnishment Exemption

  • 75% of weekly disposable earnings or 40 times federal minimum hourly wage, whichever is greater
  • Wages deposited into bank accounts for 20 days after depositing
  • Wages, paid within 6 months of returning to work, after receiving welfare or after incarceration; includes earnings deposited in a financial institution in the last 60 days

Minnesota Public Benefits Exemption

  • Public benefits
  • Veterans’ benefits
  • Workers’ and Unemployment compensation
  • Crime victims’ compensation

Minnesota Insurance Exemption

  • Accident or disability proceeds
  • Police, fire, or beneficiary association benefits
  • Fraternal benefit society benefits
  • $8,800 total: Un-matured life insurance contract dividends, interest, or loan value if insured is debtor or person debtor depends on
  • $44,000 total: Life insurance proceeds, if beneficiary is spouse or child of insured, plus $11,000 per dependent

Minnesota Pensions and Retirement Savings Exemption

  • State and Public employees
  • State troopers
  • $66,000 in present value: ERISA-qualified benefits or needed for support
  • $66,000  in present value: IRAs needed for support

Minnesota Miscellaneous Exemption

  • Earnings of minor child

Chapter 13 Bankruptcy, Minnesota

In 2010, 13% of petitioners filed for protection under Chapter 13 bankruptcy in Minnesota.  Filing Chapter 13 bankruptcy in Minnesota entails a court-appointed Trustee reorganizing the petitioner’s finances to develop and implement a 3-5 year repayment plan, using the debtor’s future earnings to pay back creditors.  Chapter 13 petitioners in Minnesota keep most – or all – of their property.

How to File Bankruptcy in Minnesota

Eligibility for property exemptions should be a key consideration for anyone considering bankruptcy protection as a means to cope with financial problems. The end goal should be to protect major assets and discharge debts. Bankruptcy cases are unique and challenging, and as such, a Minnesota bankruptcy attorney is a tremendous resource to debtor’s in need of educated advice concerning their options and Chapter 7 or Chapter 13 bankruptcies.

Bankruptcy Attorney: Minnesota

A bankruptcy petitioner has an obligation to know their rights and responsibilities as a debtor. Petitioners facing the complex and stressful task of filing personal bankruptcy will benefit from meeting with a Minnesota bankruptcy attorney, who can clarify federal bankruptcy laws and state exemptions and advise what options are appropriate given one’s individual circumstances.