MINNESOTA ASSET EXEMPTIONS

Kelly Law Office
1013 Ford Road
Minnetonka, MN 55305
Phone: (952) 544-6356
Fax: (952) 546-3690
Mobile: (612) 735-3797
dave@kelly-law.com

AT A GLANCE:

Introduction

Domicile Requirements

The Federal Exemptions

The MN State Exemptions

INTRODUCTION

If you are sure you are doing a Chapter 13, you can skip this page. This is primarily about Chapter 7 in Minnesota. Keep in mind that the theory of a Chapter 7 is that all your assets are liquidated by the Trustee and distributed to the creditors. BUT the Trustee can only have assets which are not exempt. So one of the most important issues is what assets can the debtor claim as exempt. In many cases the debtor can claim everything or nearly everything he or she has as exempt. This results in the debtor being able to keep everything or nearly everything he or she has. If there is a large asset which can't be claimed as exempt, the debtor might want to consider Chapter 13. In Chapter 13 the Trustee is only concerned about cash flow, not assets.

Here's a video on this topic which I just posted on youtube:

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DOMICILE REQUIREMENTS

In the good old days, a debtor could engage in exemption shopping by moving from state to state to find the best list of exemptions. Minnesota's is actually one of the better choices. With the help of credit industry lobbyists, Congress in passing the new law has attempted to put an end to this practice. They are making it much more difficult by imposing more stringent domicile requirements.

So lets say you moved to Minnesota from Colorado a few months ago. Since you have been here for over three months, Minnesota is where you are required to file your bankruptcy. However, the domicile requirements of the new law say we have to look back 24 months from the date of filing, and then look at the six month period before that. Where you lived for the majority of the time in that six month period determines which state's exemption laws apply. Dave Kelly calls this the "where were you living during the six months before two years ago rule."

Besides the where were you living years ago question, there are also new rules to apply when claiming a homestead as exempt. The two most important ones seem to be the following:

Before you can claim Minnesota's full $200,000 of equity homestead exemption, you have to have lived in Minnesota in that homestead for at least 1,215 days - about three and a third years. Prior to that you are limited to exempting $136,875.00 of equity, provided that you have been here long enough to use the exemptions under Minnesota statutes.
The bankruptcy trustee can look back ten years for transactions in which assets which would not otherwise have been exempt are converted to homestead equity. For example, let's say you sell your cabin up north and use the proceeds to pay down the balance owing on your homestead mortgage. Under the old law this would have the effect of changing what had been non-exempt equity in the cabin into exempt equity in the homestead, and it was considered an OK thing to do. Under the new law this would be strictly verbotin, unless it had been done over ten years ago.

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The Federal Exemptions:

Here's a concept to try and get your mind around. There is a list of exemptions provided by federal law. BUT this list can only be chosen by debtors in states where the legislature has passed a law which "opts in" to the list. Each state gets to decide if this federal list is available for bankruptcy filers in that state. Last time we counted, fifteen states have "opted in" including Minnesota. Bankruptcy is a matter of federal law, but Congress has decided to allow state legislatures to mess with this piece of it. You have the option to use the federal exemption list in Minnesota if:

You qualify as being domiciled in Minnesota - see the where were you during the six months before two years ago rule above - or;
During the six months before two years ago you were living in a state which has opted in, such as Texas or Washington.
During the six months before two years ago you were living in a state where the exemption laws specifically provide that they can't be used by people residing outside the state or can't be applied to property outside that state. Kansas appears to be one such state.

So, PROVIDED that you qualify to use the exemptions available under Minnesota law, there are two completely different lists of exempt assets from which you must choose, one provided by state law and one provided by federal law. The debtor must choose which list he or she is going to use, and then use that list exclusively. Choose well, Grasshopper. There can be no crossover between the two lists. In Minnesota it is usually best to use the federal list except in cases where the debtor has a lot of equity in a homestead. The Minnesota homestead exemption is bigger and better than what is allowed under the federal exemptions. Other than in that circumstance, for Minnesota residents the federal list is usually more protective. In large part this is because the federal list contains a catch-all where one can claim anything which may not be exempt under one of the specific provisions.

In joint bankruptcies the following amounts claimable under the federal exemptions can usually be doubled. Including the most recent increases as of April 2007, the following is a summary of what may be claimed by an individual petitioner under the federal list:

$20,200 of equity in the debtor's primary residence.
$10,755 of household goods, furnishings and appliances, provided that no single item is valued at over $525.
The debtor's interest of up to $3,225. in one motor vehicle.
Jewelry of a value up to $1,350.
Tools of the trade or business of debtor having a value of up to $2,025.
Cash value of life insurance up to $10,775.
Professionally prescribed health aids - no dollar limit.
Social security benefits, disability benefits, most pension benefits, and child support or alimony - no dollar limits.
Personal injury claims having a value of up to $20,200, not including pain and suffering or "actual pecuniary loss."
The catch-all: any other assets up to $1,075.00 in value plus up to another $10,125 of value if the homestead exemption was not fully utilized.

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THE MINNESOTA STATE EXEMPTIONS:

If you choose to claim the exemptions available under the statutes of the State of Minnesota, the exemptions available include but are not necessarily limited to the following:

The family bible, library and musical instruments.
A seat or pew in any house or place of public worship and a lot in any burial ground.
All wearing apparel, one watch, utensils and foodstuffs of the debtor and debtor's family.
Household furniture, household appliances, phonographs, radio and television receivers of the debtor and the debtor's family not exceeding $8,550.
25% of debtor's disposable earnings or debtors earnings up to the amount of the Federal minimum wage for forty hours per week, whichever is more.
The debtor's homestead including 160 acres of land. Whether claimed jointly or individually, the value of the claimed homestead exemption may not exceed $300,000 or, if the homestead is used primarily for agricultural purposes, $750,000. The homestead exemption does not apply to mortgages or mechanic's liens.
Farm machines and implements not exceeding a value of $13,000.
Tools, implements, machines, instruments, office furniture, stock in trade and library reasonably necessary in the trade, business or profession of the debtor not exceeding $9,500 in value; provided that this exemption and the farm machine exemption may only be combined in an amount not to exceed $13,000.
The library or apparatus used in the instruction of youth in any university, college or seminary which is open to the public.
Life insurance proceeds of a surviving spouse or child not exceeding $38,000. Add another $9,500 for each dependent of the surviving spouse or child.
Benefits from a police or fire department association or from a fraternal benefit association.
A manufactured home inhabited as a home by the debtor.
One motor vehicle to the extent of a value not exceeding $3,800. This number may be higher if the vehicle has been modified to accommodate someone with a physical disability.
Cash value of an unmatured life insurance policy up to $7,600.
Employment benefits under a stock bonus, pension, profit sharing, annuity, individual retirement account or similar plan on account of illness, disability, death, age or length of service up to $57,000 and "additional amounts ... to the extent reasonably necessary for the support or the debtor and any spouse or dependent of the debtor."

Each case is different, and you should consult your attorney concerning the specifics of your case. The entire area is extremely tricky, quirky and sensitive, and this summary of necessity leaves out a great deal of detail. The amounts used are those which took effect on July 1, 2004, and they are subject to periodic increases to take inflation into account. The next increase is expected in 2006 and should take effect on July 1st of that year.

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Kelly Law Office represents bankruptcy clients throughout the Twin Cities - Minneapolis, Minnesota area including Champlin, Crystal Bay, Dayton, Eden Prairie, Excelsior, Hamel, Hopkins, Howard Lake, Long Lake, Loretto, Maple Plain, Minneapolis, Minnetonka Beach, Minnetonka, Mound, Navarre, Osseo, Rogers, Saint Bonifacius, Saint Paul, Spring Park, Wayzata, Young America, Bloomington, Edina, St. Louis Park, Wayzata, Plymouth, Maple Grove, Brooklyn Park, Anoka, Shakopee, Hastings, Eagan, Burnsville, Buffalo, Waverly, Montrose, Hennepin County, Anoka County, Carver County, Scott County, Ramsey County, Dakota County, and Wright County.

The information you obtain at this site is for general information purposes on and is not legal advice. You should consult the attorney of your choice for individual advice regarding your own situation. The use of the Internet for communications with the firm will not establish an attorney-client relationship and messages containing confidential or time-sensitive information should not be sent.