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Understanding the Minnesota Bankruptcy Homestead Exemption

When filing bankruptcy, the homestead exemption is very important because it protects the equity in the home.

Under Minnesota Law, the homestead exemption allows a homeowner to exempt up to $390,000 of the equity within their home or other property that is defined under the homestead exemption system. The total amount of the property exemption could be up to $975,000 if the property is used for agriculture.

The guidelines are rather strict in that the property cannot exceed 160 acres. Previously, Minnesota law only protected up to a half acre of land if it was located within the city limits, but the law has been amended and that restriction has been removed.

If married, you cannot double the exemption like you could in other states. However, that does not discount any other advantages to a joint bankruptcy filing with your spouse.

Let’s take a look at the scope of the Minnesota homestead exemption:

This is an exemption that applies to real property, such as your home or condo. You can also protect the full value of your manufactured home. It doesn’t matter whether your home is manufactured or traditional, you must live on the property in order to protect it under the Minnesota exemptions.

Minnesota law also allows you to protect any insurance proceeds that you receive from the damage or loss of your exempt homestead up to the amount that is protected by the homestead exemption.

Keep in mind that Minnesota bankruptcy law allows you to use either the federal or state exemption. In this case, the Minnesota exemption is going to be much better than the federal exemption because the federal exemption is just $22.975 (married couples can double). You cannot pick and choose from the state and federal exemptions as you go. Instead, you have to choose state exemptions for everything or federal exemptions for everything. Unless there is something within the federal exemptions that is going to give you something better than preserving your home, the state exemptions may work better for you.

Some other things to keep in mind:

  • In Minnesota there is no need to file a homestead declaration because the exemption is automatic.
  • The Minnesota homestead exemption will not give your home protection from debt that you may have incurred from home improvement projects or by hiring laborers to work on the home.
  • The exemption amounts are adjusted during even numbered years on July 1. This means that what was decided upon in 2014 will be the same for 2015, but the number is going to change again in 2016 on July 1.

If you are considering bankruptcy, it is ideal to have a free consultation with your attorney so that you can have all of your questions asked. Many enter the prospect of bankruptcy with fear, but the process can be a smooth one. Many who file also do not necessarily have to lose property to pay back debt. There are options to avoid or minimize property loss, but only speaking with your attorney will give you the answers.