Can I Keep My House If I File a Chapter 7 Bankruptcy?

Student loans and credit cards have fueled a spike in filing personal bankruptcy in Minnesota last year, with a 54 % increase from the previous year. For personal bankruptcy, most people file a Chapter 7 or Chapter 13. This article will focus on Chapter 7 and the exemptions Minnesota offers in terms of protecting your house.

You can qualify for a Chapter 7 bankruptcy by passing the “means test.” The means test is a two-prong analysis of your household income. If you fall below it, you can file a Chapter 7 bankruptcy, meaning almost all of your debt would be wiped away with a few exceptions. If your income is above the threshold, you may still file a Chapter 7, but you must complete the second prong of the means test, know as the “long-form” or “long” means test.

Now the question I often get with Chapter 7 bankruptcy is, “do I get keep my house?” The answer is often yes. Minnesota offers the “federal” exemptions or the “state” exemptions. If you want to file using the federal exemptions, the federal code only allows you to individually protect $27,900 of equity in your home. Meaning if you have more than $27,900 equity in your homestead, you would more than likely want to file using the “state” exemptions to protect your homestead instead of the federal exemptions.

Utilizing the Minnesota “state” exemptions may allow you to protect up to $450,000.00 in equity to your homestead or up to $1.125 million if the property is used for agricultural purposes (up to 160 acres). Thus, if you have a considerable amount of equity in your home, you should consider using the state exemptions to protect your homestead.

You need to have expert attorneys to protect your home and assets when filing for bankruptcy. If you have any more questions on bankruptcy, Farrish Johnson is here to protect you. Contact us at 507-625-2525.