07 Oct Federal and State Bankruptcy Exemptions
If you are thinking about filing for bankruptcy in Minnesota you need to be familiar with the two types of bankruptcy exemptions statutes. The first and most commonly used are the Federal Bankruptcy Exemptions. The Federal exemptions general are commonly used when a client does not own a house or does not have over 20k of equity in a home. This is because the Federal Exemptions allows a wildcard exemption to cover cash or other items that would not be exempt using the Minnesota State bankruptcy exemptions. The Minnesota exemptions are primarily used to cover a great deal of equity in a piece of homestead real property. Using the Minnesota Exemptions you can currently exempt $390,000 worth of property value or equity in the property. The problem with using the Minnesota exemptions are they do not allow any wildcard exemptions for cash or tax refunds. A full list of the Federal exemptions can be found at this link http://www.law.cornell.edu/uscode/text/11/522.
If you file using the Minnesota exemptions it is important to file the case to limit the amount of cash you have on hand when the case is filed. Otherwise some of this cash may not be exempt and you may have to turn it over to the bankruptcy trustee. If you are thinking about filing a bankruptcy case using the Minnesota exemptions it is important to use an attorney who is familiar with the exemption scheme. You must take the time to determine that you have valued your home accurately to make sure using the Minnesota exemption is necessary. This is becoming more of an issue lately due to rising home prices across the State and Country. When you file a case using the Minnesota exemptions it is generally a more complicated bankruptcy case, and extra care must be used when filing the case.
I have most of my clients get an appraisal or real estate value letter if the value of a property is an issue in a case. In some cases the tax assessed value also works. The thing to remember when valuing a house and getting an estimate it is subjective, and the price could vary depending upon the market conditions when a house is listed. The other factor to consider when determining the value of a home is the cost to sell and close a house. Currently the real estate commissions range from 4 to 6% of a home sales price, and in most cases sellers pay some of the buyers closing costs. These costs can greatly reduce the amount of usable equity in any given piece of property.
The other common question is people are generally concerned with keeping pensions and 401k money in bankruptcy. To date I have not seen a client with an amount of retirement funds that exceeded the allowable exemptions. The only recent issue with retirement funds is the funds must be linked to work and not inheritance. This is an important development is you recently inherited some retirement accounts; they may not be protected by the current bankruptcy exemptions statutes. If you are have questions regarding properly exempting your property in bankruptcy give our office a call.