A reaffirmation is an official way to “reobligate” yourself on the loan. This involves the lender sending us a reaffirmation contract to be signed by you.
What Are the Bankruptcy Exemptions in Minnesota?
The name for Chapter 7 bankruptcy in Minnesota is “Liquidation.” Although that sounds scary, it doesn’t mean you will lose all of your assets. In fact, for the great majority of our clients, we are able to protect their assets. When we file your case, we disclose all of your assets, and then we apply the exemptions to those assets. The exemptions are the protections for your assets. When you read about Chapter 7 Liquidation online, many of the articles focus only on assets getting liquidated, but that is only part of the process, the other part of the process that does not get mentioned in these online articles is that there are exemptions to protect many assets.
Essentially we think of the exemptions as Monopoly money, and basically you are buying back your assets. There are two sets of exemptions that you can use in Minnesota, and this varies by state. There are federal exemptions under the bankruptcy code, and then there is are the Minnesota state exemptions under state law. Each state has decided whether they will opt in or opt out of the federal exemptions. In Minnesota, we are an opt in state. When you file bankruptcy in Minnesota you have the option of either using the federal exemptions or the Minnesota state exemptions. In Iowa, Iowa is an opt out state. If you live in Iowa and file for Chapter 7, you can only use the Iowa exemptions. They will not permit you to use the federal exemptions. You are probably asking yourself, what is the difference? The federal exemptions have various categories, and each of these categories has a value limit.
For example, for each individual you can protect about $23,000 of equity in their home. The equity is the value over and above the balance of the mortgage. If you have a $100,000 home and you owe $80,000 against it, you have $20,000 of equity. Under the federal exemptions, we can protect that. There are exemptions for household goods, furnishings, automobiles, jewelry, and other personal belongings. They have various exemptions limits, but under the federal exemptions you also have a wildcard category. In that wildcard category you can have up to another $13,000 of protection for things that are otherwise not categorically protected. That is very useful to protect things like the amount of money you have in your bank account on the day your case is filed.
What the court is looking at in terms of assets is what you had on the date your case was filed. But the way the court looks at it is you do not have to have possession of the asset for it to be considered an asset. For example, if we are filing near the end of the year and you typically get a $5,000 tax refund, then even though you are not going to get that tax refund until February, March, or April of the following year, the court considers that an asset. And so that is where the wildcard exemption becomes very helpful. We can take part of that $13,000 and protect that asset for our clients. The wildcard exemption is tied to the real estate homestead exemption. So it slides between $1,100, and $13,000 depending on how much of that homestead equity you use.
It really has not been too much of an issue in the past few years because of the real estate market crash, but now with home values going up, we are looking much more closely at these things than we used to. If you have equity in your home which is more than $23,000, we would then move you over to the Minnesota state exemptions. Under the Minnesota state exemptions, you can exempt up to $390,000 of equity in your home. If you have agricultural land it is actually more. You have a lot more homestead protection under the Minnesota state exemptions, however while the Minnesota state exemptions have household goods, vehicles, tools of the trade, jewelry, and all those other things, the values do not line up identically with the federal rules so you have more or less in those categories depending on the various groups.
The big difference between the federal exemptions and the Minnesota state exemptions is that the Minnesota state exemptions do not have a wildcard category. For the amount of money you have in your bank account on the date of filing, depending on what the source is, we might only be able to protect about seventy-five percent of that money. There is no protection for your tax refunds that you might receive next year. Many times when we are using state exemptions we are timing the filing out with a tax refund if that is a concern. If somebody is two months out from getting a large tax refund, instead of filing their case right away, we might wait until they have received the tax refund, and spend it on necessary living expenses so it is no longer an asset on the date their case is filed. That is one way we can address the exemptions and protect our clients under the law.
For more information on Bankruptcy Exemptions in Minnesota, a free initial consultation is your next best step. Get the information and legal answers you are seeking by calling today.
Chapter 13 is essentially a payment plan that you organize through the court system. Think of it as a consolidation loan with teeth.
There are 2 things you must do after your case is filed: (1) attend the meeting of creditors (aka the 341 hearing); and (2) complete a debtor’s education course via phone within 75 days from the date your case was filed. The 341 hearing is sometimes referred to as the meeting of creditors because your creditors can attend the meeting and ask you questions about the information contained in your petition.