Minnesota Bankruptcy Laws

MN Bankruptcy Laws

Bankruptcy is a court-ordered protection for those individuals who are unable to pay their bills. When someone files for bankruptcy, creditors must notify the bankruptcy court of any claims they may have on the debtor. In certain circumstances, the Department of Revenue can file claims for payment of tax debts. Furthermore, filing for bankruptcy also triggers an automatic stay which prevents creditors from certain activities such as taking legal action in order to collect a debt.

In some cases, a debtor’s tax debt or other agency debt may be discharged in bankruptcy. For tax debts that are not discharged, the statute of limitations is extended for the time that the person was in bankruptcy plus an additional thirty days. If a bankruptcy case is dismissed, however, the creditors retain all their rights for collecting the debt, and the statute of limitations is extended by the length of time that the bankruptcy was open and an extra thirty days. It is important to keep these potential consequences in mind when filing for bankruptcy.

How to File Bankruptcy in Minnesota

Making the decision to file for bankruptcy is never easy, and it’s important to understand the different costs associated with the process. Hiring a lawyer might be the most expensive part of filing for bankruptcy, but there is also the option to file without a professional legal representative. This guide will provide an overview of what to expect when filing for bankruptcy in Minnesota alone, including the necessary documents you’ll need to collect, credit counseling courses you must complete, and the forms you’ll need to fill out and submit.

credit counseling course

Once you have all your documents ready, you’ll need to sign up for a credit counseling course within 180 days before filing for bankruptcy. Generally, these courses can be done online or by phone and usually cost under $50. If you’re not able to afford this fee, you can apply for an income-based waiver when signing up for the course. Upon completion, you’ll receive a certificate of completion which must be submitted with your bankruptcy petition, or else your case could be dismissed.


The main forms needed to file bankruptcy are federal and can be downloaded as fillable and printable PDFs from UScourts.gov at no cost. It’s important that while filling out these forms, you list all your debts including secured debts such as mortgages and car loans, unsecured debts like credit cards and medical bills, and any priority unsecured debts like alimony and child support. Additionally, if you don’t have all your creditor information readily available, you should get a copy of your credit report from one of the three consumer credit reporting agencies free of charge every 12 months.

filing fee

The fee to file a Chapter 7 bankruptcy in Minnesota is $338 and if your income is less than 150% of the poverty guidelines in Minnesota, you may be eligible for a complete fee waiver. Those who still need assistance paying the fee can request to pay the fee in two equal installments. However, note that if a payment is missed, the court may dismiss your bankruptcy case and you won’t receive a refund.

Once all your bankruptcy forms are completed and fees obtained, you can either mail your documents or file them in person at the clerk’s office. Finally, make sure to print only on one side of the paper in black ink as double-sided pages aren’t allowed.

Different Forms of Minnesota Bankruptcy

Minnesota has different kinds of bankruptcy that allow individuals relief from their debt problems. These two kinds of bankruptcy depend on the amount of debt, the number of people residing in a household, the household income, and the current debt payment amounts.

An individual’s income and situation will be calculated along with the statewide income for Minnesota. These calculations will designate if an individual is eligible for bankruptcy and, if so, which kind. A simple difference between Chapter Seven bankruptcy and Chapter Thirteen bankruptcy is the monthly amount that can be paid toward the debts.

If you’re considering filing for bankruptcy, it’s important to understand the different options available.

  • Under Chapter 7 bankruptcy, those with incomes lower than the median income in Minnesota or Wisconsin are eligible to have their unsecured debt wiped out. This includes credit cards, medical bills, and certain kinds of loans.
  • Alternatively, a Chapter 13 bankruptcy entails restructuring your debt according to a payment plan agreed upon by your creditors. A trustee is appointed by the court to oversee your payments and ensure that creditors receive a percentage of what is owed over a period of three to five years. It’s important to understand the ins and outs of both these processes before making a decision.

Chapter 13 Bankruptcy

If an individual can pay a minimum of one hundred sixty dollars a month on his or her debts, he or she will be eligible for Chapter Thirteen bankruptcy. This kind of bankruptcy takes an individual’s income and separates it into a personal payment plan. The payment plan will require monthly payments be made over a five-year time span. If any payments are missed, consequences will subsequently follow. Chapter Thirteen bankruptcy can also have plans as low as three years but plans cannot exceed five years.

Can you pay off your Chapter 13 Plan Early?

The short answer is yes! Paying off all of your unsecured creditors the full amount they are owed will allow you to exit the plan and be debt-free immediately. This does not require a discharge; all that is left to do is make the payment and clear any outstanding balances.

If you find yourself in financial distress while on a Chapter 13 plan, it may be possible to get a hardship discharge. If the court finds that continuing with the plan could cause extreme hardship, they can grant a discharge from the plan.

The “applicable commitment period” for Chapter 13 plans varies depending on your income level. For those whose income is below the median for their state, this period is 36 months. This means that you must pay for at least 36 months (unless you can pay 100% of your unsecured debts back in less time). If, however, your income is higher than the median for the state, you must pay for 60 months.

Chapter 7 Bankruptcy

If you’re struggling to get out of debt due to an overwhelming amount of unpaid bills, bankruptcy might be worth considering. To qualify for Chapter 7 bankruptcy, you must first pass the means test, which compares your income to the median income in your state. If you make more than the median amount, deductions may be taken into account when determining your eligibility. However, if the means test indicates that you make too much money to qualify for Chapter 7, you may still be able to file for Chapter 13. It’s important to be informed of all your options when deciding how to proceed with filing for bankruptcy.

If an individual cannot pay more than one hundred dollars a month on his or her debts, he or she will be eligible for Chapter Seven bankruptcy. Instead of adopting a payment plan for the debt problems, an individual will be assigned a trustee. The trustee will then place the maximum values of the non-exempt property and sell the property.

The acquired funds will then be used to pay creditors and halt foreclosures. Chapter Seven bankruptcy can be completed in six months or less but normally no less than three months. How much property is to be sold depends on the amount of the debts and the value of the property.

If the individual can pay more than one hundred dollars but cannot yet pay one hundred sixty dollars, he or she will most likely be granted Chapter Seven bankruptcy.

Minnesota Exemptions

When filing for bankruptcy, you may be feeling like you’re going to lose everything you own. Fortunately, this isn’t the case! The laws surrounding bankruptcy in both Minnesota and Wisconsin allow for exemptions that protect certain items of personal property from being seized and sold off. This means that if you can prove an item is covered by an exemption, it will remain yours even after bankruptcy is finalized.

Individuals have the right to choose federal exemption statutes over Minnesota exemption statutes. These exemptions can include pensions, motor vehicles, homes, insurance coverage, most personal property under seventy-two thousand dollars, public benefits, livestock, tools for usage in a trade, and unpaid wages.

  • In Chapter 13 bankruptcies, you can keep all your possessions as long as you stay current on any loans secured by them or pay at least the non-exempt value to the trustee.
  • In Chapter 7 filings, anything that’s exempt from creditors’ claims is allowed to remain in your possession. If your property is worth more than the designated exemption amount, it may need to be sold off to cover debts but you’ll receive the exempted value back.

An alternative to this is selling any non-exempt property beforehand and using the money for other purposes. Just bear in mind that any assets you got rid of before filing could still be tracked down by the trustee or creditors and reclaimed, so it’s important to speak with a lawyer before taking any action. Ultimately, understanding what’s exempt and what’s not, plus discussing your options with an attorney, can help ensure that you don’t lose anything unnecessarily during bankruptcy proceedings.

FAQs for MN Bankruptcy Laws

How long does bankruptcy take in MN?

Typically, it takes about four to six months after filing a Chapter 7 bankruptcy petition for your obligations to be discharged and the matter to be finalized.

What assets cannot be touched in bankruptcy?

Assets that are typically protected from being touched during bankruptcy include exempt retirement accounts, homesteads, and public benefits such as Social Security, SSI, etc. It’s important to note that these assets still may be subject to liquidation if a creditor petitions the court and is able to establish a claim against them.

Can I keep my house if I file bankruptcy in MN?

It depends on the value of your home and how much equity you have in it. As of 2020, you can keep up to $400,000 worth of equity in your primary residence when filing Chapter 7 bankruptcy in Minnesota.

How much does bankruptcy Chapter 7 cost in MN?

The total cost of filing for Chapter 7 bankruptcy can range from $500-$1200 depending on your specific situation. This includes the court filing fees, attorney fees, credit counseling courses, and any other financial obligations associated with the process.

How much debt is worth filing for bankruptcy?

Generally speaking, you should consider filing for bankruptcy if you have more than $15,000 in unsecured debt (such as credit card debts), or more than $20,000 in secured debt (such as mortgage or car loans).

How much equity can I have in my home and still file Chapter 7 Minnesota?

As of 2024, you can protect up to $400,000 worth of equity in your primary residence when filing for Chapter 7 bankruptcy. Anything above this amount may be subject to liquidation.

What do you lose when you file Chapter 7?

When you file for Chapter 7 bankruptcy, most of your debt will be discharged, but not all. Additionally, some non-exempt assets may be sold in order to pay off creditors. Lastly, there will be a lasting impact on your credit score.

Can I spend money after filing Chapter 7?

Yes, but it’s best to consult with an experienced bankruptcy attorney first. Doing so will help ensure that you don’t spend too much and run into trouble later on—as spending too much before filing could lead a discharge to be denied.

How long after bankruptcy can creditors come after you?

After your debts are discharged in bankruptcy, creditors may no longer attempt to collect on those debts. Additionally, creditors are legally prohibited from contacting you regarding them after the case has been closed.

How often do creditors object to Chapter 7?

Creditors rarely object to Chapter 7 bankruptcies because they know there is little chance they will recover any of their lost debts. That said, they may object if they believe that a debtor is trying to hide assets or if they fear that a debtor is taking advantage of the process to obtain a “fresh start.”

Who pays debts after bankruptcy?

Upon completion of the bankruptcy process, creditors generally receive no payment from the debtor(s). Some debts—like child support payments, alimony payments, or certain government fines—are not discharged and must be paid separately by the debtor(s).

Do I qualify for Chapter 7 Minnesota?

To qualify for Chapter 7 bankruptcy in Minnesota, one must usually pass the means test and prove inability to pay debts in full. Consulting with an experienced bankruptcy attorney beforehand can help determine whether or not you qualify.

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