{"id":286857,"date":"2021-04-13T11:16:46","date_gmt":"2021-04-13T16:16:46","guid":{"rendered":"https:\/\/ability-fl-prod.internetbrands.com\/ability-law\/bankruptcy\/bankruptcy-laws-by-state\/minnesota-bankruptcy-exemptions-and-law.html"},"modified":"2026-09-10T09:35:51","modified_gmt":"2026-09-10T14:35:51","slug":"minnesota-bankruptcy-exemptions-and-law","status":"publish","type":"page","link":"https:\/\/www.findlaw.com\/state\/minnesota-law\/minnesota-bankruptcy-exemptions-and-law.html","title":{"rendered":"Minnesota Bankruptcy Exemptions and Law"},"content":{"rendered":"\n
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Minnesota Bankruptcy Exemptions and Law<\/h1>\n\n
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\n By Balrina Ahluwalia, Esq.<\/a> | Legally reviewed by Catherine Hodder, Esq.<\/a>\n | Last updated\n
\n \n <\/i>\n Legally Reviewed\n <\/summary>\n\n
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This article has been written and reviewed for legal accuracy, clarity, and style by FindLaw\u2019s team of legal writers and attorneys<\/a> and in accordance with our editorial standards<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n\n

\n \n <\/i>\n Fact-Checked\n <\/summary>\n\n
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The last updated date refers to the last time this article was reviewed by FindLaw or one of our contributing authors<\/a>. We make every effort to keep our articles updated. For information regarding a specific legal issue affecting you, please contact an attorney in your area<\/a>.<\/em><\/p>\n\n <\/div>\n <\/details>\n<\/section>\n\n\n

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Key Takeaways<\/h2>\n

Minnesota<\/span> bankruptcy laws<\/span> allow individuals to eliminate or reorganize unmanageable debt. Under Chapter 7 liquidation<\/span> or Chapter 13 reorganization, an automatic stay<\/span> immediately halts collection activities, foreclosures<\/span>, and wage garnishments<\/span>. Filers<\/span> can protect essential assets by choosing between state or federal exemptions<\/span> before receiving a court discharge of eligible unsecured debts.<\/p>\n\n <\/div>\n <\/div>\n<\/div>\n\n

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Whether you live in Minneapolis<\/span>–St. Paul<\/span>, Duluth<\/span>, or anywhere else in the state, overwhelming debt can feel like a problem with no solutions. However, several debt relief options may be available. One is bankruptcy, which may cause unwarranted dread. Bankruptcy is widely regarded as a common and responsible way to address debt. In 2024, over half a million Americans filed for bankruptcy<\/a>. That doesn\u2019t mean it\u2019s right for you, but understanding how it works can help you decide whether to file.<\/p>\n

This article explores what it means for a Minnesotan to file bankruptcy<\/span><\/a>. We review how debts are eliminated, which property is protected, and how bankruptcy impacts your current and future finances. We\u2019ll also explain who\u2019s eligible for different types of consumer bankruptcy and answer common questions.<\/p>\n

If your debt has become unmanageable, consider speaking with a lawyer before deciding how to proceed. A bankruptcy attorney who\u2019s licensed in Minnesota<\/span><\/a> can review your situation and help you understand appropriate debt relief options, which may or may not include bankruptcy. Either way, you\u2019ll be able to make an informed decision. Most bankruptcy lawyers offer free consultations.<\/p>\n

In the meantime, let\u2019s start with some basic bankruptcy rules.<\/p>\n

Minnesota<\/span> Bankruptcy Law<\/span><\/h2>\n

The U.S. Bankruptcy Code<\/span><\/a> is the federal law<\/span> governing bankruptcies. Federal <\/span>bankruptcy courts<\/span> handle these cases under federal and state law<\/span>. Exempt property rules dictate which assets and property are protected during the bankruptcy process<\/span>.<\/p>\n

Minnesotans filing for bankruptcy can follow either state or federal exemption<\/span><\/a> rules, depending on which exemption system best suits their financial situation. You can only choose one. Picking and choosing between federal and state exemptions on an item-by-item basis is not an option.<\/p>\n

Understanding the different types of bankruptcies<\/span><\/a> can help you see how they work and which one may be right for you. Let\u2019s take a closer look.<\/p>\n

Types of Bankruptcy<\/span><\/h2>\n

Two main types of consumer bankruptcy exist: Chapter 7<\/a> and Chapter 13<\/a>. Both are addressed in U.S. <\/span>Bankruptcy Court<\/span>. Each type treats your debt and property differently.<\/p>\n

Chapter 7 Bankruptcy<\/span><\/h3>\n

Chapter 7 is available to those who pass a financial means test based on income and expenses<\/a>. It allows you to eliminate nearly all your unsecured debt. Chapter 7 is often referred to as a liquidation<\/span> bankruptcy because a bankruptcy trustee<\/span> will generally sell your nonexempt property to repay your creditors. Chapter 7 cases<\/span> usually last three to four months and can stay on your credit report<\/span> <\/a>for up to 10 years.<\/p>\n

Chapter 13 Bankruptcy<\/span><\/h3>\n

Also known as reorganization, Chapter 13 is often the choice for people with regular income<\/span><\/a>. It lets you enter a court-approved repayment plan<\/span> that restructures and usually reduces some of your debt. Chapter 13 often allows people with mortgages to keep their homes.<\/p>\n

Most Chapter 13 cases<\/span> take three to five years to complete, after which the court typically discharges any remaining eligible unsecured debt<\/a>. Chapter 13 bankruptcies<\/span> can stay on your credit report<\/span> for up to seven years.<\/p>\n

The Automatic Stay<\/span><\/h2>\n

One of the major reasons people file for bankruptcy is to stop the endless stream of phone calls from collection agencies and threats of legal action. That\u2019s because the court issues an automatic stay<\/span><\/a> when you file your bankruptcy petition<\/span>. This court order<\/span> halts most collection action during the bankruptcy process<\/span>, including wage garnishments<\/span>, foreclosure<\/span>, and most litigation.<\/p>\n

The stay doesn\u2019t stop criminal prosecutions<\/a>, divorce proceedings, or most collection of domestic support obligations. It does prevent standard debt collection activity and can buy you some breathing room.<\/p>\n

Secured vs. Unsecured Debt<\/h2>\n

Bankruptcy doesn\u2019t treat all of your debt the same way. When you file, your debts will be labeled as secured<\/a> and unsecured<\/a>. This designation is important because it plays a major role in how much you\u2019ll be required to pay off during bankruptcy.<\/p>\n

Unsecured Debt<\/h3>\n

Unsecured debt is the most common type of debt<\/a> in individual bankruptcies. The term describes those situations where your creditors have no security interest in your property and can\u2019t seize or repossess it if you fail to pay them. The most common types of unsecured debt are unpaid credit card<\/span> bills<\/a>, medical bills<\/span>, and court judgments.<\/p>\n

Secured Debt<\/h3>\n

When you have debt that\u2019s been secured, your creditors have the right to seize your property if you fail to pay them. Secured debt is often created by loan contracts where you put up some of your property as collateral for the loan, usually the item that you\u2019re using the loan to purchase. The most common types of secured loans are mortgages<\/a> and car loans.<\/p>\n

How Does Chapter 7 Handle Debt?<\/h3>\n

Filing for Chapter 7 bankruptcy<\/span> will often allow you to discharge nearly all of your unsecured debt, but there can be some unsecured non-dischargeable debts<\/span>. They include student loans<\/span><\/a> (unless you file a separate action to prove undue hardship) as well as spousal and child support<\/span> obligations.<\/p>\n

Secured creditors receive better treatment under Chapter 7 because the bankruptcy filing<\/a> doesn\u2019t affect their right to seize your property for nonpayment. The automatic stay<\/span> may postpone repossession<\/span>\u00a0actions, but the judge will eventually allow them to move forward. This leaves you with three options:<\/p>\n