What are the Minnesota Bankruptcy Exemptions?

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In a Nutshell

When you file a Chapter 7 or Chapter 13 bankruptcy you will learn that there are two types of exemptions that you can use. In Minnesota, you can use both federal bankruptcy exemptions and Minnesota bankruptcy exemptions. When Congress enacted the bankruptcy laws, they allowed states to decide if they wanted to opt into using the federal exemptions. Minnesota is considered an “opt-in” state because you can choose to use either exemption. If you choose to use Minnesota’s bankruptcy exemptions, you may also use the federal nonbankruptcy exemptions to protect retirement accounts and disability benefits. These additional exemptions can’t be used if you choose to use the federal bankruptcy exemptions.

Written by Attorney Karra Kingston.  
Updated July 28, 2020


What Are Minnesota Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?

Many people assume that filing bankruptcy means giving up everything you own. When you file bankruptcy, it does not mean that you will lose all of your property. In fact, for the majority of bankruptcy filers, all of their assets are protected. When you file a bankruptcy case, all of your property is disclosed on your bankruptcy forms, then you apply bankruptcy exemptions to the property. The exemptions protect your property from being taken by the bankruptcy trustee. The bankruptcy court is sympathetic to the fact that you need to be able to maintain a basic standard of living. The purpose of filing bankruptcy is to get a fresh start. If all of your belongings were taken away, that would be nearly impossible. Thus, the bankruptcy court allows you to keep certain necessities. Bankruptcy can give you a fresh start by making sure creditors cease any collection actions like wage garnishments and other collection efforts. 

Does Minnesota Allow The Use Of Federal Bankruptcy Exemptions?

When you file a Chapter 7 or Chapter 13 bankruptcy you will learn that there are two types of exemptions that you can use. In Minnesota, you can use both federal bankruptcy exemptions and Minnesota bankruptcy exemptions. When Congress enacted the bankruptcy laws, they allowed states to decide if they wanted to opt into using the federal exemptions. Minnesota is considered an “opt-in” state because you can choose to use either exemption. If you choose to use Minnesota’s bankruptcy exemptions, you may also use the federal nonbankruptcy exemptions to protect retirement accounts and disability benefits. These additional exemptions can’t be used if you choose to use the federal bankruptcy exemptions.

Married couples, filing jointly, must use the same law to exempt their property. This means one spouse cannot use federal law while the other uses state law. Minnesota law allows the state exemption amount to be doubled if a married couple is filing jointly. 

To benefit from the Minnesota bankruptcy exemptions, you must be a Minnesota resident for at least two years when your bankruptcy case is filed. Congress implemented this to stop people from moving to other states that had more favorable exemptions. Note, that Minnesota law requires certain exemptions to be adjusted for inflation on July 1 of even-numbered years.

Minnesota Bankruptcy Exemptions:

Real Property Exemptions: Minnesota Homestead Exemptions

Bankruptcy exemptions allow you to exempt the equity that you have in your real estate. Equity is the value of your property minus how much you owe. These exemptions allow you to keep a certain amount. Keep in mind that some exemptions are more generous than others. The Minnesota homestead exemption allows you to keep the equity in your principal place of residence. You can choose to either use the Minnesota homestead exemption or the federal exemption. If you choose to use the federal exemption you can protect up to $23,675 of equity in your home. The Minnesota homestead exemption is a lot more generous, allowing you to exempt $390,000 and up to 160 acres of home on a primary residence or up to $1,050,000 if it is a farm. Keep in mind that Minnesota law does not allow married couples, who file jointly, and have an interest in the property, to double the homestead exemption. If you’re choosing the Minnesota bankruptcy exemptions to take advantage of the higher homestead exemption, keep in mind that you have to have purchased the home more than 1,215 days before filing bankruptcy. This restriction is contained in the Bankruptcy Code

Many people worry that they will lose their home if they choose to file bankruptcy. Using a homestead exemption allows you to keep your property safe from creditors and the bankruptcy trustee. When you fill out your bankruptcy forms you will need to claim the exemption to protect your home. 

Personal Property Exemptions: 

Consumers filing bankruptcy can keep their personal property, like household goods and tools of trade under the Minnesota bankruptcy exemptions. Below is a list of exemptions that can be used to ensure that your personal property is safe from creditors. 

Clothing, One Watch, Utensils & Food: 

  • You can exempt up to the full value of clothing and food.

Farm Machinery 

  • You can exempt up to $13,000 for farm machines. 

Tools of the Trade & Livestock, Crops & Agriculture purposes:

  • You can exempt up to $11,500 in tools of the trade and livestock and crops. 

Motor Vehicle Exemption:

  • If you have a car you can exempt up to $4,800. 

  • If you are a disabled person and your car is modified for your disability you can exempt up to $48,000. 

Burial Plot, Church Pew or Seat:

  • You can exempt up to the full value. 

Appliances, furniture, jewelry, radio, phonographs, & TV:

  • You can exempt up to $10,800. 

Bible & Books: 

  • You can exempt up to the full value for Bible and books. 

Wedding Ring or Symbols:

  • You can exempt up to $2,940.00 for wedding rings. 

Insurance Proceeds for Damaged Exempt Property: 

If you have property that would be exempt but was damaged and you are expecting insurance proceeds to cover your loss, those proceeds can be exempt. For example, if your engagement ring worth $2,000 was destroyed and your insurance company is willing to give you $2,000 to replace the ring, that money can be exempt. 

Wildcard Exemption:

Some states allow a wildcard exemption to be used for any property that does not have an exemption. Minnesota statutes do not have a wildcard exemption. Keep in mind that if you use the federal exemptions, you get a wildcard of $1,325 and can use up to an additional $12,575 of any unused homestead exemption to protect any type of property. 

Other Minnesota Exemptions:

Personal Injury: 

  • There is no limit on the amount you can exempt for recoveries due to personal injury.

Wrongful Death Recovery: 

  • There is no limit on the amount that can be exempt for personal injury recovery. 

Money Benefits:

Wages:

Wage exemptions allow people to collect money for wages that they earned, but they did not receive as of the day of filing. These are considered “earned but unpaid” wages. You can keep up to 75% of gross weekly earnings or 40 times the accepted minimum wage amount set by the US guidelines, whichever is greater. You can exempt wages deposited in 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 are fully exempt. 

Retirement Accounts 

  • Under the Minnesota bankruptcy exemptions, you can exempt up to $69,000 in employee payments, current or future, towards pensions, profit-sharing, and retirement plans. 

  • ERISA qualified plans are protected under applicable bankruptcy law even if you’re claiming exemptions based on Minnesota statutes.

  • Keep in mind, that if you decide to use the Minnesota bankruptcy exemptions, you can use the nonbankruptcy exemptions to exempt some retirement plans. These include:

  • Social Security benefits

  • Civil Service benefits, and 

  • Veterans Benefits

Federal Bankruptcy Exemptions: 

If you don’t own real property that has too much equity, then you may want to consider using the federal bankruptcy exemptions instead of the Minnesota exemptions. Below is a list of the federal law exemptions you can use if you decide that you are not going to use the Minnesota exemptions: 

  • Motor Vehicle Exemption - up to $4,000

  • Homestead Exemption - up to $25,150

  • Jewelry Exemption - up to $1,700 

  • Wrongful death recovery - no limit 

  • Personal injury recovery - up to $25,150 except for pain and suffering

  • Lost earning payments - no limit 

  • Tools of the trade - up to $2,525

  • Life insurance proceeds with loan value up to $13,400 

  • Wildcard exemption - $1,325 of any property, and the unused homestead exemption portion of up to $12,575

  • Alimony and child support - no limit 

  • Roth IRA - up to $1,362,800

  • Health aids - no limit 

  • Household furnishings, radio, TV, VCR, electronics, books, antiques, musical instruments, wedding rings, non-farm animals - $625 per item 

Filing Chapter 7 Bankruptcy 

Filing a bankruptcy case to get debt relief can be overwhelming for some people. The exemptions may seem confusing if you have never seen them before. Don’t stress out, take a deep breath and don’t let the bankruptcy exemptions scare you. Getting out of credit card debt is essential to living a stress free life. If you are really overwhelmed, speaking with a Minnesota bankruptcy attorney may be helpful. A bankruptcy lawyer will be able to review your financials and determine if Chapter 7 bankruptcy or a Chapter 13 bankruptcy case is the most appropriate for you. Many bankruptcy lawyers offer free consultations. So, even if you don’t think you have the funds to hire an attorney, speaking with one can be extremely beneficial and will only cost you time.

Upsolve helps people get out of debt and file bankruptcy without an attorney. If you don’t have the financial means to hire a lawyer, Upsolve can provide you with all of the free bankruptcy tools you need to do it on your own. 



About the author
Attorney Karra Kingston

Ms. Kingston began her career as a bankruptcy attorney. She has appeared in front of many federal court judges and has helped numerous debtors obtain a fresh start. Ms. Kingston understands the complex federal rules for discharging debt. While working as a bankruptcy attorney, Ms... read more

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