At Kain & Scott, one of the biggest concerns that our clients have is what’s going to happen to their house when they file bankruptcy. However, there’s no need to be alarmed because most of the cases that our MN Bankruptcy Lawyers file are considered “no asset” cases. That means you get to keep everything, including your house. No matter where you live in Minnesota there are either state or federal bankruptcy exemptions designed to protect your property. And fortunately in MN our MN Homestead Exemptions are rather generous compared to most other states.
Chapter 7 Bankruptcy and the MN Homestead Exemption
If you qualify for a Chapter 7 Bankruptcy after completing the means test and decide to file a Chapter 7 , the odds are that you’ll be able to use the MN Homestead Exemption to protect your home from being liquidated by the Bankruptcy Trustee to pay back your creditors. Clients should know, however, that they must be current on their mortgage payment by the time the chapter 7 case is filed or run the risk that the mortgage company (not the trustee) will ask the bankruptcy court for permission to begin foreclosing on the home. Other than that unless you have a significant amount of equity built in your home the possibility of losing it is extremely unlikely.
This is because the Minnesota Bankruptcy Homestead Exemption when filing both individually and joint is $390,000. As you can see that’s a substantial amount of equity which most people don’t have. As I stated earlier, Minnesota is very generous when it comes to the Homestead Exemption especially in comparison to the Federal Exemptions which are $23,675 for one filer and $47,350 for joint filers. Most debtors are usually more concerned if they can pay back their mortgage arrears and continue to be able to afford to keep making their payments after they file. If becoming current is not practical, filing a Chapter 13 Bankruptcy is a better option for them.
Chapter 13 Bankruptcy and the MN Homestead Exemption
Chapter 13 Bankruptcy is similar but different than filing a Chapter 7 Bankruptcy in that you don’t have pay back your mortgage arrears before you file in order to keep your house. However, you are still eligible for the same $390,000 Minnesota Homestead Bankruptcy Exemption. When you file a Chapter 13 Bankruptcy you get to roll in your mortgage arrears into an easy to pay, 3-5 year, re-payment plan. That way you don’t have to worry about how you’re going to be able to get caught up on your missed payments and as long as you stay current on your monthly payments after you file, you get to keep your home.
When you file a Chapter 13 Bankruptcy you can also roll in the rest of your unsecured debt into the re-payment plan, making one nice easy and affordable payment for you for the terms of the plan. After you’ve completed your plan any remaining debt gets wiped clean. Tax Free. Forever! Chapter 13 is a great option for the debtor who can’t afford to pay back their mortgage arrears yet still wants to keep their home and continue to pay on it.
How to Know Whether to File a Chapter 7 or 13 Bankruptcy
Before you decide which Bankruptcy you want to file you need to decide what you want to do with your home. Do you want to keep it or not? Can you afford to keep making your mortgage payments or not? Are you okay with the possibility of foreclosure? These are all questions you’ll want to ask yourself and decisions you’ll have to make.
If don’t think you’ll be able to afford to make your monthly payments after you file, you could be putting yourself at risk for foreclosure. However if this is the case and you really want to keep your home a lot of the times lenders are more willing to modify your loan or even consider refinancing.
Besides your home you also want to take into consideration your other assets. Taking a good look at all of your options for your vehicles, pensions, retirement accounts and other personal belongings should be done in order to determine whether to file a Chapter 7 or 13. Understanding the potential exemptions you can use to protect your property is crucial when filing bankruptcy because depending on whether you use State and Federal Property Exemptions makes big a difference. If the exemptions are used correctly you could quite possibly be eligible to protect all of your property and file a “no asset” case like a lot of clients we see.
Kain & Scott Can Help
Because of the complexity of the bankruptcy process and the importance of understanding the state and federal exemptions in their entirety at Kain & Scott we always suggest consulting with an experienced MN Bankruptcy Lawyer before you file. It’s very important to have a clear understanding of all of your options in order to rest assured that you are making the best decisions for you and your family. At Kain & Scott we can help you get through this difficult time in your life. We have over 47+ years of combined bankruptcy experience and the resources and information you need. Contact us today for your free, no obligation bankruptcy consultation.
