claiming your assets as exempt Archives - Better Call Dave

November 20, 2024November 21, 2024

New Improved Minnesota State Exemptions

Minnesota shields your home and necessities of life from creditors.

By Dave Kelly, Minnesota Bankruptcy Lawyer

Historically Asset Protection was Sadly Inadequate

If you have been watching the videos on my channel or reading my blog posts, you may have come across the ones where I whine about how poor and porous the Minnesota state exemption statute has been. Up until this year what we had in this state for an exemption statute was a bit of an embarrassment. The only electronics exempted were a phonograph, a radio and a TV. Computers were not exempt. Neither were cell phones, tablets or any other electronic devices.

There was no jewelry exemption except for wedding rings, and that was limited to rings actually exchanged at a wedding ceremony. Things we consider necessities in this climate, such as riding lawn mowers and snow blowers, were not exempt. Over the years there were several attempts to update the statute, which for the most part failed. Until now.

Major Exemption Reform Now in Effect

On August 1st a massive update went into effect. Finally! It is now possible to file a Chapter 7 bankruptcy using the Minnesota state exemptions and still keep most if not all of the necessities of life. Here are some of the items that have been either added or expanded upon:

1. The family Bible, Torah, Qur’an, prayer rug, and other religious items in an aggregate amount not to exceed $2,000 in value. (550.37, Subd. 2) Before the only exemption was for the family Bible.

2. A personal library in an aggregate amount not exceeding $750. (Subd. 2a) This is about the same as the old provision except a dollar amount has been added. Without the dollar amount this provision was of little value because it was probably unconstitutional. The Minnesota constitution says that the legislature can pass laws exempting a reasonable amount of property. Our court has said this means that if a limit of some kind on the amount exempted is not specified, it’s not constitutional.

3. Musical instruments in an aggregate amount not exceeding $2,000. (Subd. 2b) This is also not new except that a dollar amount has been added. Now the exemption can be used because it should now be in compliance with our state constitution.

4. All public assistance based on need and the earnings or any person who is a recipient of public assistance. (Subd. 14) This section has been amended to specifically include certain tax credits including the Minnesota renter’s credit.

5. The household goods exemption has been expanded to include computers, tablets, printers, cell phones, smart phones, and other consumer electronics. (Subd. 4b) Previously there was almost no exemption for electronic devices. A provision for household tools and equipment – such as lawn mowers and snow blowers – was also added. Previously riding lawn mowers and snow blowers were not exempt. (Subd. 27)

9. In the event that your wages are garnished: There is an exemption for 75%, 85% or even 90% of your disposable earnings, based on a complicated sliding scale. It depends on how much is earned compared to the minimum wage. (571.922) These limits don’t apply to child support. But watch out: The sliding scale with the 85% and 90% limits doesn’t go into effect until April 1, 2025, and then only for legal actions started after that date. Until then the limit for most people is a flat 75%.

10. Debtor’s interest in jewelry up to a value of $3,062.50. Previously there was no exemption at all for jewelry, except for wedding rings.

11. One motor vehicle to the extent of a value not exceeding $10,000. This is double the previous exemption. (Subd. 12a)

12. Last but not least. Here’s what might be the best thing given to us by the legislature in 2024: a wild card exemption, which can only be used in bankruptcy, in the amount of $1,500. If you are filing a bankruptcy, this can be used to exempt up to another $1,500 of any asset that doesn’t fit under one of the other categories.

Minnesota Chapter 7 Now Relatively Painless

Between these new or expanded exemptions and the old exemptions, I am thinking that most of my clients who need to use state exemptions will now find a Chapter 7 bankruptcy to be relatively painless. In many cases the only thing that will still not be exempt will be tax refunds. For a more complete discussion of Minnesota state exemptions, check out exemptions page.

Better call Dave. 952-544-6356.

August 2, 2014August 2, 2014

Using the Federal Wild Card Bankruptcy Exemption in Minnesota

In either a Chapter 7 or Chapter 13 bankruptcy in Minnesota, once it’s established that you qualify to use the federal exemptions, the most important exemption of all is probably the one they call the “wild card” exemption. It is also sometimes called the “catch all,” and is provided for in 11 USC 522 (d)(5). You might hear me call it “the d 5.” Here’s a video I posted recently on the subject.

Yes, sorry the lighting and sound are terrible on this video, but I’ve leaving it up because the content is valuable.

The exemption has a minimum of $1,225 and a maximum of $12,725. Most of my clients qualify for the maximum. It’s called the wild card or catch all because it can be applied to any asset. Unlike all other exemptions, the asset does not have to fit into a particular category before it an be exempted under the wild card. The best thing about it probably is that it can be used in combination with another exemption.

For example, say you have a car that has equity of $4,675. It has a KBB private party value of $9,675, but there’s a car loan with a balance of $5,000. First I would claim the federal automobile exemption which is $3,675. Then I would apply $1,000 of the wild card to take up the slack. Now the car is 100% exempt. My client gets to keep the car. The trustee can’t have it. And my client still has $11,725 of wild card to apply to other assets.

In a joint filing by a married couple, each party has their own wild card exemption of up to $12,725. If all the assets were joint, that would have the effect of doubling the wild card for them. However, I’ve never seen a couple yet that owed everything jointly. Most couples have a hodgepodge of assets – some his, some hers and and some theirs. This would be worse yet if Minnesota were a community property state, but we’re not. I often find that I have to take out a pad of paper and make columns listing his wild card items and her wild card items separately, so I can make sure that neither column exceeds the $12,725. It’s quite unusual to see a situation where those limits are exceeded, but I have seen it happen. Using a note pad is a pretty low tech way to figure it out, but my soft ware doesn’t do that job for me.

Getting the exemptions right is quite tricky. Be sure you have a lawyer who knows what he or she is doing, and don’t even think of trying to do the case yourself. Failure to properly exempt assets is one of the most common mistakes made by people who try to represent themselves in the bankruptcy court.

This is for general information only, is not legal advice, and does not create an attorney-client relationship. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.

July 2, 2014

No Inflation in Housing, Home Furnishings or Car Costs Since 2012?

Every two years as long as I can remember the Minnesota exemptions were increased. But guess what, this year – 2014 – the Minnesota Department of Commerce has announced that there will be no increase in the Minnesota State exemptions. Here’s a video I recently posted about this. Some day I’ll get the lighting right when I do these videos.

This is based on some statistics that they have showing that apparently there has not been enough inflation to trigger any increases. This would indicate that the cost of buying a car has not increased, the cost of buying a home has not increased, and the cost of household goods and furnishings and appliances has not gone up.

I am inviting your comments and feedback. Has there really been no increase in the cost of buying a house, the cost of buying a car or the cost of buying home furnishings and appliances during the past two years? If those costs have gone up in other parts of the county, have they not also increased in Minnesota?

Do you think the MN Department of Commerce is right, or have you experienced some price increases in the past two years?

This is for general information purposes only and is not legal advice. It does not create an attorney-client relationship. I am a debt relief agency. I help people file for relief under the federal bankruptcy code.