Can I Protect My Home From the Judgments of Creditors?

Foreclosure Home For Sale Real Estate Sign Isolated on a White Background.

Yes. You can protect your home from the judgment of creditors. Minnesota Statutes Section 510.01 provides an exemption that protects a judgment debtors’ homestead from seizure or sale under legal process.[1] A homestead is defined as the “house owned and occupied by a debtor as the debtor’s dwelling place, together with the land upon which it is situated…”[2] The homestead exemption, however, is limited as to both area and value. Minnesota Statutes Section 510.02 provides that: “[t]he homestead may include any quantity of land not exceeding 160 acres [and]…may not exceed $390,000.”[3] Thus, when the value of the property exceeds these limits, the judgment creditor may execute on the excess.

An owner of a homestead exempt property may sell and convey the homestead without subjecting it, or the proceeds of its sale for the period of one year after the sale, to any judgment or debt from which it was exempt.[4] It follows that the grantee of the homestead property acquires the title to the property exempt or immune from the claims of the grantor’s creditors.[5]

In Hentges v. P.H. Feely & Son, Inc., 436 N.W.2d 488 (Minn. Ct. App. 1989), the respondent creditor P.H. Feely & Son, Inc. (“Creditor”) had docketed five judgments against a Mr. Peter Rutt (“Rutt”). Rutt was the record owner of property located in Scott County, Minnesota, at the time the judgments were docketed.[6] Appellants Steven and Jeanette Hentges (“Hentges”) had purchased the property from Rutt under a contract for deed.[7] After the Hentges discovered the judgments they requested an order removing the Creditor’s judgments from the record.[8] Without explanation, the Hentges request was denied by the trial court by order dated April 4, 1988.[9] The Minnesota Court of Appeals, however, reversed the trial court’s determination finding that because Rutt homesteaded the property prior to selling it to the Hentges, the Hentges acquired the property free and clear of Rutt’s creditors by virtue of Section 510.07.[10]

[1] Minn. Stat. § 510.01.

[2] Id.

[3] Minn. Stat. § 510.02, subdiv. 1 (where the homestead is used primarily for agricultural purposes the value is limited to $950,000).

[4] Minn. Stat. § 510.07; Sisco v. Paulson, 45 N.w.2d 385, 386 (Minn. 1950).

[5] Minn. Stat. § 510.07 (homestead exemption is not lost during a transfer by sale); Hentges v. P.H. Feely & Son, Inc., 436 N.W.2d 488, 491 (Minn. Ct. App. 1989) (citing Sisco, 45 N.W.2d at 387) (holding that a lapse of time between the execution of a deed and the recording of it does not provide an opportunity for a judgment lien to attach); Neumaier v. Vincent, 43 N.W. 376 (Minn. 1889) (holding that lien does not attach in time between purchase and actual occupancy).

[6] Hentes, 436 N.W.2d at 490.

[7] Id.

[8] Id.

[9] Id.

[10] Id. at 491.

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