Filing for chapter 7 bankruptcy is a great way for individuals struggling with debt to find financial relief. 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.
Minnesotans who file bankruptcy can choose to use “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.
State exemptions provide that household appliances are generally exempt. “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.
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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!
