Filing for chapter 7 bankruptcy is a great way for individuals struggling with debt to find financial relief. When filing bankruptcy, anyone who earns less than the median Minnesota State income, based on their household size, can file a chapter 7 bankruptcy case. When they do so, the court discharges their personal liability on all of their debts, with a few exceptions (i.e. past due child support, most taxes, criminal fines, etc.)
The catch is that the debtor (the term for a person who files for bankruptcy) must turn over any property that they cannot protect to the bankruptcy trustee so that the trustee may “liquidate” (convert into cash) the property to pay debts owed to creditors. The good news is that in most chapter 7 cases, most, if not all, of the debtor’s property is “exempt,” meaning legally protected from being taken to pay creditors. The trustee can only take the remaining “nonexempt” property to pay the creditors. Many people wonder whether their lawnmower will be exempt if they file for chapter 7 bankruptcy since lawnmowers can be quite expensive and are a valuable tool that many people rely upon to maintain their lawn.
Exemptions: Your Shield Against Asset Liquidation
Minnesotans who file bankruptcy can choose to use Minnesota exemptions or “State Exemptions” or “Federal Exemptions” to protect their property. Federal exemptions are laws that protect property under the Federal Bankruptcy Code, while State Exemptions are laws that protect property as provided by the Minnesota Statutes and other applicable Federal laws separate from the Bankruptcy Code. Deciding whether one’s property is best protected under State or Federal exemptions can be complicated and is best left to an experienced bankruptcy attorney. However, generally speaking, Federal Exemptions are better suited for people who have little-to-no interest in real estate (i.e. their home). This is because Federal exemptions only protect up to $27,900 in equity in a person’s primary residential home (aka their “homestead”), but provides a wild card exemption, which can be up to $15,425, to protect various property that is not specifically exempt under other laws. State exemptions are more beneficial for people who have a lot of equity in their homes, as it protects up to $450,000 in equity in their homestead. The downside is that State exemptions do not have a wildcard exemption.
The Lawnmower Conundrum: A Case-by-Case Decision
State exemptions provide that household appliances are generally exempt. These exemptions are part of the broader bankruptcy laws that determine what property can be protected during bankruptcy proceedings. “Household appliances” are generally understood to be things such as microwaves, stoves, washing machines, vacuums, that you would ordinarily find within a person’s household. However, while many people may not think of lawn mowers, which you typically find outside the home, one bankruptcy court in Minnesota ruled that lawn mowers are exempt under State exemptions. The court reasoned that lawn mowers are necessary for people to maintain a basic standard of life.
Interestingly enough, the same court reasoned that computers are not exempt because, even though they are helpful and very useful, they are not as essential to one’s everyday life. The court that made this ruling in 1999 (see In Re Irwin) was just a bankruptcy court, and until a higher court (i.e. the 8th Circuit Court of Appeals) decides on whether lawnmowers are exempt, the lower bankruptcy courts may decide as they want on a case by case basis.
Under Federal exemptions, the courts have not ruled that lawnmowers are exempt as household appliances. Therefore, in order for a debtor to claim that their lawnmower is exempt, they must use their wildcard exemption to protect the lawnmower. If they do not have a sufficient amount of wild card exemption to protect the lawnmower, they must either turn over the lawnmower to the trustee, or negotiate with the trustee to pay a certain amount to keep the lawnmower.
Delving Deeper into Property Exemptions: A Minnesota Homeowner's Guide
Understanding the nuances of property exemptions is key to safeguarding your assets in a Chapter 7 bankruptcy. It's also important to note that tax refunds are considered non-exempt assets in Chapter 7 bankruptcy filings. Let’s take a closer look at the two types of exemptions available to Minnesotans and how they can impact your lawnmower and other belongings.
Federal Exemptions: A Flexible Approach for Non-Homeowners
If you rent your home or have minimal equity in it, federal exemptions might be your best bet. The federal system provides a set of specific exemptions for various types of property, including clothing, household goods, vehicles, and tools of the trade. However, the standout feature is the "wildcard" exemption, which allows you to protect up to $15,425 of any property you choose, regardless of its category.
This wildcard exemption is where your lawnmower might come into play. If it doesn't fit neatly into any other exemption category, you could use your wildcard to shield it from the bankruptcy trustee. However, remember that the wildcard amount is limited, so you'll need to prioritize which assets you protect.
Minnesota State Exemptions: Prioritizing Your Home and Homestead
If you own your home and have substantial equity in it, Minnesota state exemptions could be more advantageous. The state's generous homestead exemption allows you to protect up to $450,000 of equity in your primary residence. This means that even if you have significant debt, your home is likely safe from liquidation in a Chapter 7 bankruptcy.
However, Minnesota's state exemptions are more limited when it comes to personal property. There's no wildcard exemption, so you'll have to rely on specific categories to protect items like your lawnmower. While the state does exempt household appliances, the definition of "household appliance" can vary, and it's not always clear whether a lawnmower would qualify.
The Gray Area: Lawnmowers, the 'Household Appliance' Exemption, and the Bankruptcy Trustee
As mentioned in the main article, a Minnesota bankruptcy court has previously ruled that lawnmowers can be considered exempt household appliances under state law. The court reasoned that lawnmowers are essential for many homeowners in maintaining their property. However, this decision is not binding on all courts, and the issue remains somewhat unsettled.
If you choose to rely on Minnesota state exemptions and want to protect your lawnmower, it's crucial to work with an experienced bankruptcy attorney. They can argue on your behalf that your lawnmower is a necessary household appliance, citing the previous court decision and emphasizing its importance for maintaining your property.
Beyond the Lawnmower: Other Considerations for Property Exemptions
While your lawnmower might be a priority, it's important to consider all your assets and choose the exemption strategy that best suits your overall financial situation. Here are some additional factors to keep in mind:
-
Vehicle Exemptions: Both federal and state law offer exemptions for vehicles, but the amounts vary.
-
Retirement Accounts: Most retirement accounts, like 401(k)s and IRAs, are fully protected in bankruptcy, regardless of which exemptions you choose.
-
Tools of the Trade: If you use tools for your profession, they may be exempt under both federal and state law.
-
Personal Property: Minnesota state law exempts a certain amount of personal property, such as clothing, furniture, and household goods.
Strategic Planning with Your Bankruptcy Attorney
Deciding which exemptions to use and how to best protect your assets requires careful planning and legal expertise from a Minnesota bankruptcy attorney. Your bankruptcy attorney can:
-
Analyze your financial situation: They can review your assets, debts, and income to determine which exemptions are most beneficial for you.
-
Develop a tailored strategy: Your attorney can create a personalized plan to maximize your exemptions and protect as much of your property as possible.
-
Advocate for your interests: If any disputes arise regarding exemptions, your attorney will represent you in court and fight to protect your rights.
-
Guide you through the process: Filing for bankruptcy involves numerous legal procedures. Your attorney will be there to guide you every step of the way, ensuring a smooth and successful outcome.
Empowering Your Financial Fresh Start
Bankruptcy is a powerful tool for overcoming financial hardship. By understanding your options and working with a knowledgeable attorney, you can protect your assets, including your valuable lawnmower, and achieve a fresh financial start. Don't let fear or uncertainty hold you back from seeking the relief you deserve.
CALL NOW FOR A FREE STRATEGY SESSION FROM A MN BANKRUPTCY LAWYER AT LIFEBACK LAW FIRM
This is a very general overview of how lawnmowers are treated in chapter 7 bankruptcy cases. Before filing for bankruptcy, it is wise for one to first consult with an experienced bankruptcy attorney. LifeBack Law Firm has a new office location in Saint Paul, Minnesota, specifically located at 370 Selby Avenue, Suite 224 in Saint Paul's historic Cathedral Hill neighborhood. Come visit us there or online at lifebacklaw.com!
FAQs About Lawnmowers and Chapter 7 Bankruptcy in Minnesota
Can I keep my lawnmower if I file for Chapter 7 bankruptcy in Minnesota?
It depends. While a Minnesota bankruptcy court has previously ruled that lawnmowers can be considered exempt household appliances under state law, this is not a universal rule. The ultimate decision rests with the bankruptcy judge overseeing your case.
How can I protect my lawnmower in bankruptcy?
The best way to protect your lawnmower is to consult with an experienced bankruptcy attorney. They can help you determine the best exemption strategy, whether it's using the federal wildcard exemption or arguing for its inclusion as a household appliance under Minnesota state law.
What if my lawnmower is worth more than the available exemptions?
If the value of your lawnmower exceeds the available exemptions, you may have to negotiate with the bankruptcy trustee. This could involve paying the trustee a portion of the lawnmower's value to keep it or exploring other options to protect your assets.
Do I have to disclose my lawnmower in my bankruptcy filing?
Yes, you must disclose all of your assets, including your lawnmower, in your bankruptcy petition. Failure to disclose assets can have serious consequences, including dismissal of your case or denial of your discharge.
Can I buy a new lawnmower after filing for bankruptcy?
Yes, you can typically buy a new lawnmower after filing for bankruptcy, as long as it's a reasonable purchase and doesn't violate any bankruptcy rules. However, it's important to consult with your attorney before making any significant purchases during or after bankruptcy.
Will my riding lawnmower be treated differently than a push mower?
The type of lawnmower (riding or push) generally doesn't affect its exemption status. However, the value of the lawnmower will be a factor in determining whether it can be fully protected under the available exemptions.
