When you don’t make enough to pay the bills, filing for bankruptcy in Minnesota can be a good solution. Once you understand the differences between Chapter 7 and Chapter 13 bankruptcy, you’ll want to know:
whether your income qualifies for the bankruptcy chapter you’ve chosen, and
if you can protect your property using Minnesota’s bankruptcy exemptions.
Find out about these things, and more, such as where to find the official bankruptcy forms, approved educational courses, and your local bankruptcy court.
Qualifying for Bankruptcy in Minnesota—Means Testing
Once you know which chapter you’d like to file, you’ll determine whether you meet the chapter’s qualification requirements.
Chapter 7 bankruptcy. You’ll meet income qualifications by passing the “means test.” If your household income is lower than the median income of your state, you pass and can receive a discharge in a Chapter 7 case. You might still pass the means test after subtracting allowed expenses.
Chapter 13 bankruptcy. If your income exceeds the Chapter 7 limits, you can repay some or all of what you owe in a five year Chapter 13 repayment plan. The tricky part here is that you must have enough income to pay all required debts. To determine your Chapter 13 bankruptcy payment, you’ll do a calculation similar to that in Chapter 7. You’ll pay the greater of your disposable income, the value of your nonexempt property, or the amount of your nondischargeable debt (such as support obligations and tax debt).
The necessary income charts and expense guidelines are on the U.S. Trustee’s website (select “Means Testing Information”).
Protecting Property With Minnesota’s Bankruptcy Exemptions
An important part of deciding the best chapter for you is determining whether you’ll lose any property. Don’t worry—you won’t lose everything. In fact, you might not lose anything at all.
Finding out which assets you can protect is as simple as looking at Minnesota’s bankruptcy exemption law. A list of federal bankruptcy exemptions exists, too, and Minnesota lets residents choose between the two lists. If you use Minnesota’s bankruptcy exemptions, you can use the federal nonbankruptcy exemptions if they’re helpful.
Here's what will happen to nonexempt property (things you can’t protect with an exemption):
Spouses who file together in Minnesota can double the exemption amount in each category (except for the homestead) as long as both spouses have an ownership interest in the
Minnesota Bankruptcy Exemption Domicile Rules
You must be a Minnesota resident for at least 730 days before filing the bankruptcy petition. If you weren’t living in any one state during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. Learn more about filing for bankruptcy after moving to a new state.
Minnesota’s Bankruptcy Exemption List
Here are some commonly-used Minnesota bankruptcy exemptions. Unless indicated, all references are to the Minnesota Statutes.
Minnesota Homestead Exemption
You’ll be able to protect up to $420,000 of equity in your home and land or up to $1,050,000 of equity if your land is used for agricultural purposes (up to 160 acres). (These amounts will increase to $450,000 and $1,125,000 respectively on July 1, 2020.) Other protections include insurance proceeds for damage to your home or proceeds from the sale of your home for up to one year after the sale, up to the maximum amount of the homestead exemption (Minn. Stat. §§ 510.01, 510.02) and the full value of a manufactured home, if you live in it (Minn. Stat. § 550.37, subd. 12).
Minnesota Motor Vehicle Exemption
Up to $4,800 of equity in one motor vehicle is protected under Minnesota law. (This amount will increase to $5,000 on July 1, 2020.) If the motor vehicle has been modified at the cost of at least $3,600 ($3,750 as of July 1, 2020) to accommodate a disabled person, you can exempt up to $48,000 in the vehicle. (Minn. Stat. §550.37, subd. 12a.)
These are additional types of property you’ll be able to protect.
Employee benefits. Up to $72,000 ($75,000 as of July 1, 2020) of employee present or future payments under a stock, bonus, pension, profit-sharing, individual retirement account, Roth IRA, individual retirement annuity, simplified employee pension, or similar plan or contract on account of illness, disability, death, age, or length of service, plus any additional amount reasonably needed for the filer's support (Minn. Stat. §550.37, subd. 24). (Learn how your retirement funds may also be protected under federal nonbankruptcy exemptions by reading Your Retirement Plan in Bankruptcy.)
Personal property. Clothing, one watch, utensils, food, appliances, furniture, radio, and television up to $10,800 ($11,250 as of July 1, 2020); wedding rings up to $2,940 ($3,062.50 as of July 1, 2020); tools of your trade or business, farm implements, livestock, produce, or crops up to $11,500 ($12,500 as of July 1, 2020); farm machines up to $13,000; teachers' books and equipment’; burial plot or church pew or seat. (Minn. Stat. §550.37 subds. 3-8)
Insurance benefits. Insurance proceeds from the death of a spouse or parent up to $46,000 ($50,000 as of July 1, 2020), plus an additional $12,000 ($12,500 as of July 1, 2020) for each dependent of the surviving spouse or child (Minn. Stat. § 550.37 subd. 10); insurance proceeds from loss of or damage to exempt property (Minn. Stat. § 550.37 subd. 9); personal injury or wrongful death recovery for injury to yourself or your relative (Minn. Stat. § 550.37 subd. 16); insurance policy up to $9,600 ($10,000 as of July 1, 2020) (Minn. Stat. § 550.37 subd. 23).
Wages. Up to 75% of your gross earnings, or 40 times the federal minimum hourly wage per week (whichever is greater). (Minn. Stat. § 550.37, subd. 13)
Tax-exempt retirement accounts. Including 401(k)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined-benefit plans (11 U.S.C. § 522(b)(3)(C).) Learn more about retirement accounts in bankruptcy.
Confirming Minnesota’s Bankruptcy Exemptions
The Minnesota legislature adjusts exemption amounts in even-numbered years, as long as the amounts have changed at least 10%. The last change occurred on July 1, 2018. To stay up to date, check the website of the Minnesota Legislature.
More Minnesota Bankruptcy Information
You’ll use this information when you’re ready to prepare your paperwork and file your case.
Minnesota Credit Counseling and Debtor Education Information
Individual filers must take two financial courses—one before filing and another before receiving a discharge (debt forgiveness). Approved providers are listed under “Credit Counseling & Debtor Education” on the U.S. Trustee’s website (be sure to scroll down to your district).
Bankruptcy Costs, Filing Fees, and Forms
Most people must pay something to file for bankruptcy, but it’s usually worth the cost. Here’s what you can expect.
Official bankruptcy forms. Before the Minnesota bankruptcy court wipes out qualifying debt, you must disclose all aspects of your financial situation—income, expenses, property, debt, and property transactions—on official bankruptcy forms. These forms are free. After filling out the bankruptcy forms online on the U.S. Bankruptcy Court forms webpage, you’ll file your paperwork in your local bankruptcy court.
Bankruptcy filing fees or a fee waiver. You’ll pay a filing fee when you file your paperwork with the court unless you qualify for a fee waiver. Find out about both in Bankruptcy Filing Fees and Costs.
The bankruptcy court has four divisions. The Fergus Falls Division isn’t staffed; however, the other divisional offices accept bankruptcy filing paperwork. To determine where to file your case, go to the court’s website and select “Court Information,” then “Court Locations.”
St. Paul Division
200 Warren E. Burger Federal Building and U.S. Courthouse
316 North Robert Street
St. Paul, MN 55101
U.S. Bankruptcy Court
301 U.S. Courthouse
300 South Fourth Street
Minneapolis, MN 55415
U.S. Bankruptcy Court
Gerald W. Heaney Federal Bldg.
515 West First Street
Duluth, MN 55802
This overview provides some, but not all, of the necessary information needed in a bankruptcy case. For step-by-step filing instructions, consider purchasing a self-help book like How to File Chapter 7 Bankruptcy by Attorney Cara O’Neill and Albin Renauer J.D.