Minneapolis Bankruptcy Attorneys
Frequently, clients come to us with a fear that filing for bankruptcy will cause them to lose most of their property. Alleviating that fear is one of the rewarding aspects of our work. In reality, most clients get to keep all or most of their assets. In Minnesota you can keep your house, your car or truck, and your retirement accounts. These are the most valuable things that most people own.
The basic idea of bankruptcy is that debt should not be allowed to push somebody below a middle class lifestyle. If the monthly payments are too high, which means it’s hard to pay your mortgage and contribute to your retirement account, then bankruptcy allows a financial reset. It brings you back up to a normal middle class lifestyle by eliminating debt.
What Are Exempt and Non-Exempt Property?
Exempt property refers to the assets that bankruptcy laws allow you to keep. As you probably now realize, non-exempt property would be any assets the law does not allow you to protect from creditors through an exemption.
Under a Chapter 7 bankruptcy, the bankruptcy trustee sells non-exempt property to pay your creditors. A Chapter 13 bankruptcy usually does not include liquidating non-exempt assets. However, an individual who files Chapter 13 bankruptcy is expected to pay their creditors the value of their non-exempt property.
Choosing Federal or Minnesota State Exemptions
In several states, including Minnesota, someone filing for bankruptcy needs to choose whether they want to claim federal or state property exemptions. It’s not possible to choose exemptions from both the federal and the Minnesota exemption schedules.
Clients often ask which set of exemptions they should use. We help our clients make an informed choice based on their personal circumstances.
Most clients receive the greatest benefit from using the federal exemptions. Clients who are not homeowners or who have less than $25,150 in home equity usually find more asset protection by claiming federal exemptions.
A notable advantage of the federal exemption schedule is the Wildcard exemption. You can apply its value to any asset you would like, including cash or a vehicle. However, how much you can claim for the Wildcard exemption depends on your personal situation. The maximum you can claim for a Wildcard exemption currently is $13,900.
For homeowners who have significant equity in their primary residence, taking advantage of Minnesota’s generous homestead exemption is usually best. Currently, you can protect up to $420,000 in equity for your home and land under Minnesota exemptions. Minnesota’s exemption goes up to $1,050,000 if your land is a farm.
Common Types of Bankruptcy Exempt Property
The following kinds of assets usually are exempt under the guidelines for both federal and Minnesota exemptions.
- Equity in your primary residence as described above
- Most household items such as clothing, furniture, appliances, and televisions
- The full value of most retirement accounts, including 401(K)s, 403(B)s, and Keoghs
- Public benefits from Social Security, unemployment insurance, or Veterans Affairs
- Tools for your trade
- Cash value of life insurance policies up to a certain amount
- One vehicle up to a certain value
The equity in your car or truck up to a value of $4,000 is exempt under the federal schedule. Using your Wildcard exemption on your vehicle could increase that exemption to $17,900. The Minnesota schedule allows you to exempt up to $4,800 of your vehicle’s equity.
This is not a comprehensive list of every asset that could qualify for an exemption. If concerned about losing a particular asset that isn’t listed, please get in touch with us. We can let you know if it’s possible to exempt that asset.
Examples of Non-Exempt Bankruptcy Property
Generally, you cannot claim a bankruptcy exemption for:
- Any residential property that’s not your primary residence, such as cabins and rental property
- Valuable collectibles like artwork, coins, or stamps
- Musical instruments if you’re not a professional musician
- A second car or truck
- Luxury items such as furs
Contact Walker & Walker Today If You’re Facing Bankruptcy in Minnesota
At our law office, we understand our clients have concerns losing property as a result of their bankruptcy case. We help our clients determine whether federal or Minnesota exemptions offer the best protection for their assets. If the fear of losing assets has kept you from filing for bankruptcy, contact us to schedule a free consultation.