With all of the financial difficulties people are experiencing, many will risk assets being seized and sold for debt repayment. Did you know that certain types of property are exempt? The Minnesota constitution provides that a reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount is set by the state legislature. Essentially, exempt property is property which cannot be taken from you to pay a judgment or debt no matter how much you owe.
Exemptions support the public policy that people should be allowed at least a minimal level of existence. It is in the public’s best interest to provide individuals with the ability to be self-sustaining so they will not be dependent on the state welfare system. The exemptions allowed by Minnesota law are among the most liberal in the country, and generally exceed exemptions allowed in Wisconsin.
The most common Minnesota exemption is the homestead. To be considered the homestead the house must be owned and occupied by a debtor as the debtor’s primary residence. This means that the hunting cabin or second home on the lake generally cannot be exempt under the homestead exemption.
The homestead includes both the dwelling and some of the land. In the case of a home in a town or city, this is limited to one-half acre and equity up to $360,000. If you are a farmer and your property is used for agriculture, the acreage is limited to 160 acres and $900,000 in equity.
There are a number of other assets which can be exempt from collection, including your car, wages and earnings, business assets, certain benefits, pensions, insurance and some personal property. You may exempt one vehicle, limited to $4,400 in equity, as well as any need-based relief, social security benefits, veteran’s benefits, workers’ compensation, individual retirement accounts, up to $40,000 of life insurance proceeds, clothing and up to $9,900 in furniture, appliances and furnishings from collection. If your primary occupation is farming, then up to $13,000 of equity in equipment, livestock and crops are also exempt. $11,000 of equity in tools, machines, office furniture and inventory which are reasonably necessary in your business are also exempt.
You should be aware that property which is voluntarily pledged as collateral for a loan is different than property being exempt from involuntary collection. For example, the mortgage on your home or the lien card attached to your car cannot be avoided because the assets are exempt. If you are in default, the mortgage can be foreclosed and you can lose your home or the bank can repossess your vehicle. Another circumstance to distinguish is mechanic’s liens and tax liens which, although non-consensual, are permitted against exempt property and can be foreclosed.
In summary, these are just some of the assets which can be exempt from collection in the event of financial difficulties. It is important to know your rights and consult an attorney regarding the specifics of your situation.
By: Dehlia Seim
Published in Duluthian Magazine, February 2011