Filing for Bankruptcy in Minnesota
Overview
Bankruptcy is a federal legal process that gives people a fresh start when they cannot pay their debts. It is governed by Title 11 of the United States Code (the federal Bankruptcy Code). Minnesota residents also benefit from state exemption laws under Minn. Stat. § 550.37 , which determine what property you can keep.
There are two main types of bankruptcy for individuals:
- Chapter 7 (Liquidation) — Most unsecured debts are wiped out in about 3 to 4 months. A trustee may sell some of your property to pay creditors, but Minnesota exemptions protect many of your assets.
- Chapter 13 (Repayment Plan) — You keep your property and repay some or all of your debts over 3 to 5 years through a court-approved plan.
Both types stop collection calls, garnishments, lawsuits, and even foreclosure through something called the automatic stay. This guide walks you through who qualifies, what to expect, and how to get started.
Who this guide is for: Minnesota residents who are struggling with debt and considering bankruptcy as a way to get relief.
- The automatic stay stops all collection calls, wage garnishments, lawsuits, and foreclosure the moment you file.
- Most of your property is protected by Minnesota’s generous exemptions, including up to $450,000 in home equity.
- 75% of your wages are exempt from garnishment even before you file.
- Social Security, retirement accounts, and public benefits are fully protected.
- You have the right to a fresh start – that is the purpose of the bankruptcy system.
- Free legal help is available through Legal Aid and the Volunteer Lawyers Network.
This is legal information, not legal advice. For help with your specific situation, contact a legal aid organization.
Do I Have a Case?
Bankruptcy may be right for you if:
- You cannot pay your bills as they come due
- Creditors are suing you or garnishing your wages
- You are facing foreclosure on your home
- You have large medical bills or credit card debt
- You want to stop collection calls and get a fresh start
Bankruptcy is not the best choice for everyone. It stays on your credit report for 7 to 10 years. Some debts cannot be discharged (wiped out). You should explore all your options before filing.
Step-by-Step Process
Step 1: Evaluate Your Situation
Before you file, take stock of your finances:
- List all your debts. Include credit cards, medical bills, personal loans, car loans, mortgages, student loans, and taxes owed.
- List all your property. Include your home, car, bank accounts, furniture, clothing, tools, and retirement accounts.
- List your income and expenses. Gather pay stubs, tax returns, and monthly bills for the last 6 months.
Choosing between Chapter 7 and Chapter 13:
- Chapter 7 works best if you have low income, few assets, and mostly unsecured debt (credit cards, medical bills). You must pass the means test, which compares your income to the Minnesota median. If your income is below the median for your household size, you likely qualify.
- Chapter 13 works best if you have regular income and want to keep property (like a home in foreclosure) while catching up on payments over 3 to 5 years.
Step 2: Complete Credit Counseling
Federal law requires you to complete a credit counseling course from an approved agency before you file your bankruptcy petition. This is not optional.
- The course takes about 60 to 90 minutes.
- You can take it online, by phone, or in person.
- It usually costs $10 to $50. Fee waivers may be available if you cannot afford it.
- You must use an agency approved by the U.S. Trustee Program. A list is available at the U.S. Department of Justice website.
- You will receive a certificate. Keep this certificate. You must file it with the court.
Step 3: File Your Bankruptcy Petition
To start your case, you file a petition and several other forms with the U.S. Bankruptcy Court for the District of Minnesota. Key documents include:
- Petition — Basic information about you and the type of bankruptcy you are filing
- Schedules — Detailed lists of your property, debts, income, and expenses
- Statement of Financial Affairs — Questions about your recent financial history
- Means Test Form (Chapter 7) — Calculation to determine if you qualify
- Credit Counseling Certificate — Proof you completed the required course
Filing fees:
- Chapter 7: $338
- Chapter 13: $313
- You can ask the court to let you pay the fee in installments or waive it if you cannot afford it.
The moment you file, the automatic stay goes into effect. This is a court order that immediately stops:
- Collection calls and letters
- Wage garnishment
- Lawsuits against you
- Foreclosure proceedings
- Utility shut-offs (temporarily)
Step 4: Attend the Meeting of Creditors (341 Hearing)
About 20 to 40 days after you file, you must attend a meeting of creditors, also called a 341 hearing. Here is what to expect:
- The meeting is run by the bankruptcy trustee, not a judge.
- You will be asked questions under oath about your finances, property, and the information in your forms.
- Creditors are allowed to attend and ask questions, but they rarely do.
- The meeting usually lasts 5 to 10 minutes.
- You must attend. If you do not show up, your case can be dismissed.
Bring to the meeting:
- A government-issued photo ID (driver’s license or passport)
- Proof of your Social Security number (Social Security card or tax return)
Step 5: Complete Debtor Education Course
After you file, you must complete a second course called debtor education (also called a financial management course). This is different from the credit counseling you took before filing.
- The course takes about 2 hours.
- You can take it online, by phone, or in person.
- It usually costs $10 to $50.
- You must use an approved provider.
- You will receive a certificate. File it with the court.
Step 6: Receive Your Discharge
If everything goes smoothly:
- Chapter 7: You receive your discharge about 60 to 90 days after the 341 hearing. Most unsecured debts are wiped out. The entire process takes about 3 to 4 months.
- Chapter 13: You receive your discharge after you complete all payments under your plan, which takes 3 to 5 years.
Debts that are NOT discharged (you still owe these):
- Most student loans (unless you can prove undue hardship)
- Child support and alimony
- Most tax debts from the last 3 years
- Debts from fraud or intentional harm
- Criminal fines and restitution
- Debts not listed in your petition
After discharge, start rebuilding your credit. Pay all bills on time. Consider a secured credit card. Check your credit report to make sure discharged debts are reported correctly.
Key Deadlines
| Deadline | Details |
|---|---|
| Credit counseling | Must be completed within 180 days before filing |
| Automatic stay | Takes effect the moment you file |
| 341 hearing | Scheduled 20 to 40 days after filing |
| Debtor education | Must be completed after filing but before discharge |
| Chapter 7 discharge | About 60 to 90 days after the 341 hearing |
| Chapter 13 discharge | After completing all plan payments (3 to 5 years) |
| Refile after Chapter 7 | Must wait 8 years before filing Chapter 7 again |
| Refile after Chapter 13 | Must wait 2 years before filing Chapter 13 again |
Costs & Fees
| Item | Cost |
|---|---|
| Chapter 7 filing fee | $338 |
| Chapter 13 filing fee | $313 |
| Credit counseling course | $10 – $50 |
| Debtor education course | $10 – $50 |
| Attorney fees (Chapter 7) | $1,000 – $2,000 (typical range) |
| Attorney fees (Chapter 13) | $2,500 – $4,000 (typical range) |
You can ask the court to waive the filing fee or let you pay in installments. Attorney fees for Chapter 13 can often be included in your repayment plan.
Minnesota Exemptions
Under Minn. Stat. § 550.37 , Minnesota law protects certain property from being taken in bankruptcy:
- Homestead: Up to $450,000 in equity in your home
- Motor vehicle: Up to $4,800 in value
- Household goods: Furniture, appliances, clothing, and similar items are generally exempt
- Wages: 75% of your earned but unpaid wages are exempt
- Tools of the trade: Reasonable value of tools, equipment, and supplies used in your work
- Retirement accounts: Most retirement plans (401(k), IRA, pensions) are fully exempt
- Public benefits: Social Security, unemployment, workers’ compensation, and public assistance are exempt
Bankruptcy Preparation Checklist
When to Get a Lawyer
Bankruptcy law is complicated. Most legal aid organizations strongly recommend working with an attorney. You should especially consider a lawyer if:
- You are unsure whether Chapter 7 or Chapter 13 is right for you
- You own a home or business and want to keep it
- You have mixed debts (secured, unsecured, priority)
- You have been sued or your wages are being garnished
- Your income is above the median and you need help with the means test
Many bankruptcy attorneys offer a free initial consultation.
Related Guides
A plain-language guide to understanding your rights when you are sued for a debt in Minnesota, including common defenses and the court process. What to do if your employer has not paid you. A plain-language guide to Minnesota wage theft laws, how to file a complaint, and your rights as a worker. A step-by-step guide to filing and defending a case in Minnesota small claims court (conciliation court). Learn the process, costs, limits, and what to expect.Defending Against Debt Collection Lawsuits in Minnesota
Wage Theft and Unpaid Wages in Minnesota
Small Claims Court (Conciliation Court) in Minnesota
Where to Get Help
Mid-Minnesota Legal Aid
Volunteer Lawyers Network
LawHelpMN
Minnesota State Bar Association Lawyer Referral
- U.S. Bankruptcy Court, District of Minnesota – Self-help resources and forms at mnb.uscourts.gov.
- National Foundation for Credit Counseling – Find an approved credit counseling agency at nfcc.org.
Frequently Asked Questions
Will I lose my home if I file for bankruptcy?
In most cases, no. Minnesota has one of the most generous homestead exemptions in the country. Under Minn. Stat. § 550.37 , you can protect up to $450,000 in equity in your home. If your equity is below that amount, you can keep your home in Chapter 7. In Chapter 13, you keep your home and catch up on missed payments through your plan.
Will bankruptcy stop wage garnishment?
Yes. The automatic stay stops garnishment immediately when you file. If wages were already taken, you may not be able to get them back. But all future garnishment stops as soon as the court receives your petition.
How long does bankruptcy stay on my credit report?
Chapter 7 stays on your credit report for 10 years from the filing date. Chapter 13 stays for 7 years. However, many people see their credit scores start to improve within 1 to 2 years after discharge by using credit responsibly.
Can I file bankruptcy without a lawyer?
Yes, you have the right to file on your own (called filing “pro se”). However, bankruptcy law is complicated, and mistakes can be costly. Most legal aid organizations strongly recommend working with an attorney if possible. If you cannot afford one, contact Legal Aid or the Volunteer Lawyers Network.
Will I lose my car?
Usually not. Minnesota exempts up to $4,800 in motor vehicle value. If your car is worth less than that (or your equity is less than that after subtracting what you owe), you can keep it. If you are making car payments and want to keep the car, you must stay current on payments.
Can I choose which debts to include in bankruptcy?
No. You must list all of your debts in your bankruptcy petition. You cannot pick and choose. However, not all debts are treated the same way. Secured debts (like a mortgage or car loan), priority debts (like taxes and child support), and unsecured debts (like credit cards) are handled differently in the process.