Minnesota Bankruptcy Exemptions: Protect Your Assets in Chapter 7

Exemptions protect your property when you file bankruptcy. Minnesota gives you a choice. You can use federal bankruptcy exemptions or Minnesota bankruptcy exemptions. If you choose Minnesota’s exemptions, you can also use federal nonbankruptcy exemptions for retirement accounts and disability benefits.

Why Minnesota Bankruptcy Exemptions Matter in Chapter 7

Filing bankruptcy doesn’t mean losing everything you own. Most bankruptcy filers protect all their assets. You’ll disclose all your property on bankruptcy forms. Then you apply bankruptcy exemptions to protect that property from the bankruptcy trustee.

The bankruptcy court understands you need basic living standards. You’re filing bankruptcy to get a fresh start. Taking away all your belongings would defeat that purpose. The court allows you to keep certain necessities.

Can You Use Federal Exemptions in Minnesota?

Minnesota allows both federal and state exemptions. When Congress enacted bankruptcy laws, states could opt in to federal exemptions. Minnesota is an opt-in state. You choose which set works better for you.

Choose Minnesota exemptions and you unlock federal nonbankruptcy exemptions too. Speak with a bankruptcy attorney for free to determine which exemption set maximizes your asset protection.

Married couples filing jointly must use the same exemption law. One spouse can’t use federal while the other uses state. Minnesota law lets married couples double most state exemption amounts.

You must be a Minnesota resident for at least two years before filing. Congress implemented this to prevent exemption shopping across state lines. Minnesota adjusts certain exemptions for inflation every July 1 of even-numbered years.

Minnesota Bankruptcy Exemption Categories

Minnesota exemptions fall into three main categories. Real property, personal property, and money benefits each have specific protections.

The Minnesota Homestead Exemption

You can exempt equity in your primary residence. Equity equals your property value minus what you owe.

The federal exemption protects up to $31,575 of home equity. Minnesota’s homestead exemption is far more generous. You can exempt $510,000 and up to 160 acres on a primary residence. Farm properties get up to $1,275,000 in protection.

Minnesota doesn’t allow married couples to double the homestead exemption. You must have purchased your home more than 1,215 days before filing. The Bankruptcy Code contains this restriction.

Many worry about losing their home in bankruptcy. The homestead exemption keeps your property safe from creditors and trustees. Claim the exemption on your bankruptcy forms to protect your home.

Personal Property You Can Keep

Minnesota exemptions protect household goods and tools of trade. Here’s what you can keep:

• Clothing, one watch, utensils, and food with no dollar limit
• Farm machinery up to $13,000
• Tools of trade, livestock, and crops up to $11,500
• Motor vehicle equity up to $10,000 (or $25,000 for disability-modified vehicles)
• Burial plot and church pew at full value
• Appliances, furniture, jewelry, electronics up to $10,800
• Bible and books at full value
• Wedding rings up to $2,940

Insurance proceeds for damaged exempt property remain exempt. If your $2,000 engagement ring was destroyed, the insurance payout stays protected.

Minnesota’s Wildcard Exemption

Wildcard exemptions protect property not covered by other exemptions. Minnesota offers a $1,500 wildcard exemption.

Federal exemptions provide a $1,675 wildcard. You can also use up to $15,800 of unused homestead exemption to protect any property type.

Additional Minnesota Exemptions

Personal Injury and Wrongful Death

Minnesota has no limits on personal injury recoveries. Wrongful death recoveries also receive unlimited protection.

Wages and Income Protection

Wage exemptions protect money you’ve earned but not received. You keep 75% of gross weekly earnings or 40 times federal minimum wage, whichever is greater.

You can also exempt wages deposited in bank accounts for 20 days. Wages paid within six months of returning to work after welfare or incarceration stay protected. Any earnings deposited in financial institutions within 60 days remain exempt.

Retirement Accounts

Minnesota exempts up to $69,000 in employee payments toward pensions and retirement plans. ERISA-qualified plans receive full protection under federal bankruptcy law.

Using Minnesota exemptions? You can access federal nonbankruptcy exemptions for:

• Social Security benefits
• Civil Service benefits
• Veterans benefits

Federal Bankruptcy Exemptions in Minnesota

Don’t own real property with significant equity? Federal bankruptcy exemptions might work better. Here’s what federal law protects:

• Motor vehicle up to $5,025
• Household goods, electronics, books, and wedding rings up to $2,125 per item (total $16,850)
• Wildcard of $1,675 plus unused homestead portion up to $15,800
• Homestead up to $31,575
• Tools of trade up to $3,175
• Personal injury recovery up to $31,575 (excluding pain and suffering)
• Life insurance loan value up to $16,850
• Roth IRA up to $1,711,975

Federal law provides unlimited exemptions for:

• Lost earning payments
• Wrongful death recovery
• Alimony and child support
• Health aids

Choosing the Right Exemptions for Your Chapter 7 Case

Selecting between federal and Minnesota exemptions impacts what you keep. Compare both exemption sets against your actual property. Calculate your home equity, vehicle equity, and personal property values.

Minnesota’s generous homestead exemption benefits homeowners with significant equity. Renters or those with minimal home equity often benefit from federal exemptions. The federal wildcard exemption provides more flexibility for unusual assets.

A bankruptcy attorney can run the numbers for your specific situation. They’ll identify which exemption set maximizes your asset protection. Speak with a bankruptcy attorney for free to make an informed decision before filing.