Understanding Minnesota Bankruptcy Exemptions

Easing debtor worries by protecting necessary assets

In Chapter 7 bankruptcy, a debtor can surrender any nonexempt assets for liquidation, so that the assets can be sold to pay off creditors or pay the trustee their value to keep them. In Chapter 13, non-exempt assets can determine the minimum amount of the debtor’s repayment plan. It may sound like a person loses everything in bankruptcy, but that is far from the truth. Experienced Twin Cities bankruptcy attorneys understand exemptions and know how to help you complete your bankruptcy while retaining the bulk of your estate.

Minnesota exemptions and federal exemptions in bankruptcy

Any non-exempt property is either liquidated in Chapter 7 bankruptcy and sold to pay your creditors if you don’t pay the trustee their value, or the value of your non-exempt property can determine the minimum amount you have to pay your creditors in your repayment plan in Chapter 13. Minnesota law allows debtors to choose which level of exemptions work best for them, state or federal—there is no opportunity to mix and match exemptions. Fortunately, Minnesota’s bankruptcy exemptions are very generous and typically allow for clients to keep their property rather than liquidate it. No matter which set of exemptions is best for you, properly set up 401k retirement accounts should not be at risk.

According to Minnesota law, you can exempt the following amounts of property from your assets:

  • $390,000 and up to 160 acres of home or $975,000 of farm property
  • $4,600 for a motor vehicle
  • $10,390 in personal property such as furniture, appliances, clothes and more
  • $11,500 in tools of the trade including implements and books
  • Most personal injury insurance proceeds
  • $46,000 of life insurance payout
  • Public benefits
  • Some wages

Federal exemptions allow for much less than Minnesota bankruptcy exemptions. Under federal rule, you can exempt the following:

  • $23,675 of home equity and property
  • $3,775 for your car or truck
  • $12,625 total value (up to $600 per item) on household furnishings, appliances, animals, crops, clothes, books and musical instruments
  • $12,625 in loan value, accrued dividends, or interest in a life insurance policy.
  • $2,375 for tools of the trade including implements and books
  • $1,600 in jewelry value
  • $23,675 for personal injury claims, except for pain and suffering
  • Any compensation for wrongful death decisions or criminal restitution you were awarded
  • Any alimony or child support you receive
  • Welfare and Social Security income

Federal exemptions also allow for a wildcard exemption, or the ability to take what’s left over from your homestead exemption and apply up to $11,850 to any other property. These amounts adjust upward periodically, but your bankruptcy attorney will know what the current amounts are if they are higher.

Homestead exemptions and equity

The biggest exemption that stands to benefit clients is the homestead exemption. Equity is the amount of your property you own, or the difference between the value of an item and what you owe against it. For example, if you financed a $5,000 car and you still owe $4,000 on the loan, then you only have $1,000 in equity, since that is what you have paid for the car so far.

If you have some of your home paid off, you can exempt the equity in your home. Using the Minnesota bankruptcy exemptions, you can exempt up to $390,000 of your home equity. If you more than $390,000 in equity and therefore cannot exempt all of your home equity, you may end up paying back some of your unsecured debts in Chapter 13.

Contact a Twin Cities bankruptcy attorney today

It is important that you meet with an experienced St. Paul bankruptcy lawyer to help free you from crushing debt and protect your future. Call the law firm of Martin & Hedervare PLLC at (651) 243-2974 or contact us online today to schedule your free in-office consultation.

Donald Hedervare
About the Author: Donald Hedervare
Donald J. Hedervare, Jr. has been practicing in the areas of bankruptcy law, student loan law and military justice for 17 years. He is a member of the Minnesota State Bar Association, the Ramsey County Bar Association, and the National Association of Consumer Bankruptcy Attorneys.