MInnesota state exemptions 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.

September 11, 2018October 13, 2022

Recent Increases for the Minnesota State Exemptions

By David J. Kelly, Minnesota Bankruptcy Attorney

If you’ve been reading any of my musings, you know that when you file a Chapter 7 bankruptcy, ownership of all your stuff is temporarily and theoretically transferred to a trustee appointed by the court. I say “theoretically” because normally the trustee doesn’t get to keep any of it, or at least gets to keep very little. The reason why the trustee can’t keep your assets is that – with the help of somebody like me – you are going to claim all or most of your stuff as exempt. There are two sets of exemptions in Minnesota to choose from: the federal exemptions and the Minnesota state exemptions. The federal exemptions tend to be much better than the Minnesota state exemptions, except in one area: equity in a homestead. If you own your home and you have more than just a little equity in your home, the Minnesota state exemptions are for you.

Several of the Minnesota exemptions are indexed for inflation. The resulting increases are only applied every few years. 2018 was one of those years. The new indexed numbers went into effect on July 1st. For example: the household goods exemption increased from $10,300 to $10,800; for wedding rings the exemption increased from $2,817.50 to $2,940 in value; for life insurance proceeds it increased from $46,000 to $48,000; and the tools of the trade exemption went from $11,500 to $12,000. The most significant increase in my opinion was the homestead exemption which went from $390,000 of equity to $420,000 of equity.

For more info about exempting your property so the bankruptcy trustee can’t have it, look at my exemption page. For a rant about what’s wrong with the Minnesota state exemptions, please take a look at my post Minnesota State Exemptions Still Leaking Like a Sieve. You might also want to take a look at this video:

May 3, 2018July 15, 2022

Minnesota State Exemptions Still Leaking Assets Like a Sieve

By David J. Kelly, Minnesota Bankruptcy Attorney

When you file a Chapter 7 bankruptcy, ownership of all your assets all the way down to your socks passes to a trustee appointed by the court. The only way to avoid losing your shirt and most everything else you own is to claim the assets as exempt. If you qualify to use the federal exemptions, it is very likely that everything you own will be exempt and you will keep all your assets. That’s the result I always want to see – my client gets rid of his or her debts but keeps all his or her stuff.

The only problem with the federal exemption list is that it has a low number for the amount of homestead equity which can be exempted. If someone has more equity than can be protected by the federal exemptions, the only other choice is to use the state exemptions. The Minnesota state exemptions will protect up to $$390,000 of equity in a homestead, but other than that those exemptions leave a lot to be desired. They are hopelessly out of date in many respects.

For example, the only electronics clearly allowed as being exempt are a radio, a phonograph and television receivers. Notoriously, computers are not exempt. Neither are cell phones, tablets, game machines, printers, monitors or any other device that isn’t a TV, radio or phonograph.

There’s no exemption for jewelry, unless it’s a wedding ring that was actually present at the wedding ceremony. There’s no exemption for guns, sporting goods such as bicycles or exercise equipment, or collectibles of any kind. Household furnishings, clothing and appliances are exempt, but a riding lawn mower is not considered to be an appliance. Money in your checking account or savings account is not exempt unless it can be traced to a pay check from employment which was deposited within the last 20 days. There’s no exemption for any kind of a tax refund which may be owing or which may have accumulated as of the date of filing the bankruptcy. Bankruptcy trustees routinely present my clients with a form which signs over their tax refunds.

Several weeks ago two bills were introduced at the state legislature in St. Paul to try and correct some of this. One of them added exemptions for the following, all of which currently are absent from the exemption list:

Computers, tablets, printers and cell phones as part of the household goods exemption
Jewelry up to a value of $2,817.50 – replacing the existing wedding ring exemption
A new section exempting $3,000 of tools, snow removal equipment and lawnmowers
A wild card exemption which could be used for up to a $1,250 value of property not fitting into any other exemption; and
Health savings accounts (HSA) and medial savings accounts up to a value of $6,500.

When I heard last week that the legislature had passed an amendment to the exemption statute, I got quite excited. I thought it must be the bill I just described above. I was quite disappointed to learn that it was another bill which only added one provision: an exemption for health savings accounts and medical savings accounts up to a value of $25,000. It’s nice that the amount of the exemption is so high, but I almost never see anyone with an HSA which has any more than a few hundred dollars in it.

So except for the new exemption for the HSAs, we are still stuck with all the same old problems with the Minnesota state exemptions. Oh well, at least the antique radio in my office is exempt.

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.