Filing Bankruptcy protects your stuff from creditors. But to understand how that works, it helps to understand what a ‘Bankruptcy Estate’ is. Now you’ve probably heard the word estate used in phrases like ‘real estate,’ ‘family estate,’ or ‘estate planning.’ In bankruptcy, your estate is everything you have at the exact moment you file your bankruptcy case.
Why There’s a Bankruptcy Estate
Way back in the day, when we were first figuring out how bankruptcy should work in this country, a bankruptcy was just an “estate sale.” If someone owed to much money, the creditors (the people they owed money to) would get together at his place and they would sell their all their stuff to pay the debts. That is NOT how it works today.
These days bankruptcy is supposed to protect people in the middle class. Middle class people can have a lot of things like houses and cars and that’s all just fine. Bankruptcy protects those things from your creditors. It does that using a tool called exemptions.
What Exemptions Are
Exemptions are a tool designed to help keep everyone who files a bankruptcy in the middle class. There’s an exemption for houses, cars, even phonographs (some of these exemptions are pretty old), plus tons of other types too. All of the exemptions we we’re talking about in Minnesota fit into two sets: Federal Exemptions and Minnesota Exemptions. A lot of work goes into finding the best way to apply those exemption sets to your situation. Here’s a brief example of just a few of those differences:
- Federal Exemptions protect money and belongings. These exemptions are usually best for people who rent, or those who have special belongings they want to protect.
- Minnesota Exemptions primarily protect homes. These exemptions work best for homeowners and those who have most of their money invested in their house, and it still protects a vehicle and lots of other stuff too.
How We Help You
Now, there’s so much more that goes in to applying these exemptions to each case. Everyone’s situation is different, everyone has different things they want to protect when they file. That’s why we have experts to help you sort through the important stuff and protect the things most precious to you. If you want to know more, give us a call at 612-824-4357.