Minnesota Bankruptcy Law Overview

The following is an overview of Minnesota bankruptcy law. This Minnesota Bankruptcy Law Overview includes the following sections:

  • Origin of Minnesota Bankruptcy Law
  • Minnesota Bankruptcy Courts
  • Types of Bankruptcy in Minnesota
  • Eligibility for Minnesota Bankruptcy
  • Property That Is Exempt in a Minnesota Bankruptcy
  • Property That Is Excluded in a Minnesota Bankruptcy

Origin of Minnesota Bankruptcy Law

Minnesota bankruptcy law is primarily directed by federal bankruptcy law. The United States Constitution, Article 1, Section 8, states that “Congress shall have power . . . to establish . . . uniform laws on the subject of bankruptcies throughout the United States.” In other words, federal bankruptcy law preempts bankruptcy law in all states except to the extent that state law is recognized or integrated by federal law.

On October 1, 1979, the Federal Bankruptcy Reform Act of 1978 went into effect. This monumental piece of legislation had a substantial impact on the lives of ordinary people throughout the United States.

On April 20, 2005, the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 was signed into law. This new body of laws is sometimes called the New Bankruptcy Law or the Bankruptcy Reform Act. This law sought to close what some people called “loopholes” in the bankruptcy law and limit abuses of the bankruptcy law.

Minnesota Bankruptcy Courts

Congress established federal bankruptcy courts throughout the United States. Bankruptcies in Minnesota are filed in Bankruptcy Court in the Federal District of Minnesota. Minnesota bankruptcy cases that are appealed are taken from the Minnesota Bankruptcy Court to either the United States District Court or the Bankruptcy Appellate Panel for the Eighth Circuit. The next step in the appeals process is the United States Supreme Court.

Types of Bankruptcies in Minnesota

Chapter 7

Chapter 7 bankruptcies may be filed by individuals, partnerships, corporations, or other business entities in Minnesota. However, only an individual (a natural person) may receive a discharge of debts in a Chapter 7 bankruptcy. The most common type of Chapter 7 bankruptcy is bankruptcies filed by individuals.

Chapter 9

Chapter 9 bankruptcies may be filed by municipalities and other political subdivisions. In other words, chapter 9 bankruptcies are for government entities.

Chapter 11

Chapter 11 bankruptcies may be filed by individuals, partnerships, corporations, or other business entities in Minnesota. Chapter oh 11 bankruptcies are rarely utilized by individuals. For individuals seeking reorganization, a Chapter 13 bankruptcy is normally a better option. Chapter 11 bankruptcies are usually more expensive than Chapter 13 bankruptcies.

Chapter 13

Chapter 13 bankruptcies may be filed by individuals and small businesses in Minnesota. Corporations were partnerships are not eligible to file Chapter 13. Formerly, chapter 13 was known as “the Wage Earner Plan.” Today, Chapter 13 bankruptcies are referred to as “Adjustment of Debts for Individuals with Regular Income.”

Eligibility for Minnesota Bankruptcy

Individuals who file for Chapter 7 bankruptcy in Minnesota do not need to be U.S. citizens. There is no debt limit for Chapter 7 bankruptcy, which means that people with extremely high debt are still eligible for bankruptcy. Chapter 13 bankruptcy does have a limit. Chapter 13 bankruptcy is available to individuals with regular income whose unsecured debts are $336,900 or less, and whose secured debts are $1,010,650 or less. Individuals were married may file a joint bankruptcy case for it either a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.

Property That Is Exempt in a Minnesota Bankruptcy

Exemptions from bankruptcy are provided in section 522 of the United States bankruptcy code. In a Chapter 7 bankruptcy, a person can keep all exempt property. In a Chapter 13 bankruptcy, a person can normally keep possession of exempt property but must pay the value of non-exempt property.

Those who have not resided continuously within Minnesota for two years prior to filing for bankruptcy in Minnesota, should consult with a bankruptcy attorney regarding whether they will have a available to them the exemption laws from Minnesota or the exemption laws of the state where they previously lived.

For a list of federal bankruptcy exemptions, go here: Federal Bankruptcy Exemptions for Minnesota Bankruptcies.

For a list of Minnesota nonbankruptcy exemptions, go here: Minnesota Non-Bankruptcy Exemptions for Minnesota Bankruptcies.

Property That Is Excluded in a Minnesota Bankruptcy

Section 541 of the United States bankruptcy code excludes ERISA-qualified pensions. If a person filing for bankruptcy is holding property for another as a trustee, that property is excluded from bankruptcy. Excluded property does not need to be claimed as exempt because it is already excluded.

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