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New and improved MN debtor exemptions to take effect Aug 1

| Jun 11, 2024 | Bankruptcy, Chapter 7

After years of lobbying, the legislature finally updated Minnesota’s state exemptions, with an effective date of Aug 1 for most provisions. The full text of the bill can be found at this link (refer to lines 134-142).

MN exemptions are useful outside of bankruptcy, and also in a bankruptcy, most typically for homeowners (Debtors without real estate typically elect to use federal exemptions, for which there is a $15,000 miscellaneous exemption). There are three big things that we always have had to be careful with on a Minnesota exemption case, which is money in the bank as of the date of filing, earned but unpaid wages (which are 75% exempt), and tax refunds due and owing.

Probably the biggest change is that there is now a $1500 “wildcard” exemption. In most Minnesota exemption cases, there is an inevitable $1000-1500 or so, particularly property tax refunds, which cannot be exempted. Most trustees will not administer small cases, with “small” being defined as anywhere from $500 to $1000. With this new wild card exemption, it kind of cleans up the crumbs that the trustees have been picking off of debtors, and will permit a lot more people to move forward with bankruptcy and truly get a fresh start without needing to pay in a grand or so.

Other new provisions include an exemption for phones, tablets, computers, lawn mowers and snow blowers, which are now deemed household goods. The motor vehicle exemption was doubled from $5,000, to $10,000 ; proceeds of personal injury lawsuits are now exempt, and there are also limits on the amount for musical instruments and life insurance policies, which are required to make them constitutional.

Unfortunately, a provision that property tax refunds would be fully exempt, was dropped from an earlier draft of the bill, due to a legislative compromise.