Ohio recently passed a law to update and modernize its bankruptcy exemptions.
Exemptions are the list of property that you can protect and keep when you file for bankruptcy.
In some states, like here in Minnesota, you can choose between one of two lists of exempt property. One list is the Minnesota list, and the other list is the federal list. For the most part, these laws are very generous, and allow most people that file bankruptcy to keep all of their property.
What does the new Ohio Law do?
The new Ohio law allows:
- People to keep more equity in their house – it used to be $21,625, but it is now up to $125,000
- People to keep 529 accounts which are accounts that parents set up to save money to send their children to college
They also have some tax advantages.
What happens in Minnesota?
In Minnesota, these accounts are sometimes, but not always protected in bankruptcy. Figuring out whether or not your 529 accounts are exempt is a complicated matter, and best left to an attorney.
Remember how I said that there are two lists to choose from in Minnesota?
Only the federal list protects 529 accounts at all, and only some of the money.
- If you decide to use the Minnesota exemption list, then you may have to turn over your children’s college money to creditors
Why is this?
- Mostly because the Minnesota exemption statute has not been updated for a long time, and 529 accounts didn’t exist last time it was reviewed
What sort of things aren’t protected in Minnesota?
The Minnesota exemption statute (Source, Minnesota Statutes) is very thorough about protecting things like a seat or pew in the debtor’s place of worship, or a wedding ring (but not an engagement ring), but ignores many special types of accounts and payments that people depend on in this day and age.
- Health spending accounts
- 529 college savings accounts
- the Minnesota property tax refund
If you file with the Minnesota exemptions, then you will likely:
- Lose any tax refunds for one year
- Lose any money you have deposited in accounts that are not retirement accounts
What happens in other states?
Many states, and the federal exemptions, allow you to keep these things.
Why shouldn’t Minnesota?
Maybe it is time for this state to join Ohio and modernize our bankruptcy exemptions.
This article is not legal advice, many people who live in Minnesota can file bankruptcy using the federal exemptions, and will probably be able to keep all of the property mentioned in this article. Talk with a Minnesota bankruptcy attorney to figure out what property you can exempt or protect, and what property you cannot exempt.
WHAT TO DO NEXT
If you’ve got equity in your home, or have 529 accounts and are considering filing for Chapter 7 Bankruptcy or Chapter 13 Bankruptcy in Minnesota, then why not not speak to us now at 612.824.4357?
We’ll give you all the help and advice you need.
We’re looking forward to helping you.