Exemptions are used to protect your property and assets as you go trhough bankruptcy. You can choose from two sets of exemptions when you file Chapter 7 bankruptcy in Minnesota — federal bankruptcy exemptions and Minnesota bankruptcy exemptions. If you choose to use Minnesota’s bankruptcy exemptions, you may also use the federal nonbankruptcy exemptions to protect retirement accounts and disability benefits.
Written by Attorney Karra Kingston.
Updated April 1, 2022
What Are Minnesota Bankruptcy Exemptions and Why Are They Important in Chapter 7 Bankruptcy?
When you file bankruptcy, it doesn't mean that you'll lose all of your property. In fact, the majority of bankruptcy filers find that 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'd be very difficult. Thus, the bankruptcy court allows you to keep certain necessities.
Does Minnesota Allow Filers To Use Federal Bankruptcy Exemptions?
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 in to using the federal exemptions. Minnesota is considered an “opt-in” state because you can choose to use either set of exemptions.
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 can't use federal law while the other uses state law. Minnesota law allows married couples filing jointly to double the state exemption amounts.
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.
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Minnesota Bankruptcy Exemptions
Minnesota exemptions fall into three broad categories: real property, personal property, and money benefits.
Real Property: The Minnesota Homestead Exemption
Bankruptcy exemptions allow you to exempt the equity that you have in real estate that serves as your primary residence. Equity is the value of your property minus how much you owe.
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 $27,900 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's a farm.
Keep in mind that Minnesota law doesn't allow married couples 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'll 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, 1 watch, utensils, and food are exempt up to their full amount.
Up to $13,000 of farm machinery can be exempt.
Tools of the trade and livestock, crops and agriculture purposes can be exempt for up to $11,500.
Up to $4,800 of your equity in a motor vehicle is exempt. If you have a disability and your car is modified for your disability you can exempt up to $48,000.
You can exempt the full value of a burial plot and church pew or seat.
You can exempt up to $10,800 of appliances, furniture, jewelry, radio, phonographs, & TV.
You can exempt up to the full value for Bible and books.
You can exempt up to $2,940 for wedding rings.
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.
Some states allow filers to use a wildcard exemption to protect any property that's otherwise not exempt. Minnesota doesn't have a wildcard exemption. Keep in mind that if you use the federal exemptions, you get a wildcard of $1,475 and can use up to an additional $13,950 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.
Many different types of money benefits can also be exempted.
Wages:Wage exemptions allow people to collect money for wages that they've earned but haven't received 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 federal minimum wage, whichever is greater.
You can also exempt wages deposited in bank accounts for 20 days after depositing and wages paid within six months of returning to work, after receiving welfare or after incarceration This includes earnings deposited in a financial institution in the last 60 days.
Retirement Accounts: Under the Minnesota bankruptcy exemptions, you can exempt up to $69,000 in employee payments, current or future, toward 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
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 $4,450
Homestead Exemption - up to $27,900
Jewelry Exemption - up to $1,875
Wrongful death recovery - no limit
Personal injury recovery - up to $27,900 except for pain and suffering
Lost earning payments - no limit
Tools of the trade - up to $2,800
Life insurance proceeds with loan value up to $14,875
Wildcard exemption - $1,475 of any property, and the unused homestead exemption portion of up to $13,950
Alimony and child support - no limit
Roth IRA - up to $1,512,350
Health aids - no limit
Household furnishings, radio, TV, VCR, electronics, books, antiques, musical instruments, wedding rings, non-farm animals - $700 per item up to a total of $14,875
Filing Chapter 7 Bankruptcy
Filing bankruptcy to get debt relief can feel overwhelming. The exemptions may seem confusing if you've never seen them before. If you're really overwhelmed, speaking with a Minnesota bankruptcy attorney may be helpful. A bankruptcy lawyer will be able to review your information and determine if Chapter 7 or Chapter 13 bankruptcy is best 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 can also help you file Chapter 7 bankruptcy without an attorney.