What are the Bankruptcy Exemptions and Which Assets can be Protected in Bankruptcy?

When filing either chapter 7 or chapter 13 bankruptcy, each individual debtor is allowed to exempt a limited amount of equity in real property, cash, personal assets and other property while still obtaining a discharge of most debts. Only when a debtor exceeds the available exemptions will they have “non-exempt” assets that will either be liquidated in chapter 7 or, alternatively, the debtor will effectively pay to keep over the duration of a chapter 13 plan.

Bankruptcy exemption law allows for the exclusion of certain assets from the bankruptcy estate and, thereby, protects such assets from the reach of either creditors or the bankruptcy trustee. When filing bankruptcy in Minnesota, a debtor elects to utilize either the federal exemptions or the Minnesota state exemptions. Since the federal exemptions are more liberal as to what assets can be protected, a Minnesota debtor will only elect state exemptions when they have over $20,000 in equity in a homestead (or, less commonly, a significant certain asset such as pending insurance proceeds or personal injury award). Most debtors however opt to use federal exemptions for the availability of up to a $12,775 “wildcard exemption” which can be used to protect any assets which are not otherwise protected under a separate federal exemption.

As of the date of this post, the federal exemptions provide for the following amounts per debtor:

Asset Type


Available Federal Exemption*
Equity in homestead property


$23,675 per debtor (double for joint filers)
Household goods, furniture and wearing apparel


$12,625 (limit of $600 per item in this category)
Wedding rings


Alimony / child support


unlimited so long as funds are necessary for support of the family
Unemployment / Disability benefits (future benefits only)


Social Security benefits (future benefits only)


Cash value of life insurance policy


$12,625 (only one policy is exempt)
Vehicle equity


$3,775 (only one per debtor)
Personal injury claims that are not yet settled


ERISA-qualified retirement accounts such as 401(k), 403(b) and 408 plans


Individual Retirement Accounts (IRAs)


usually unlimited subject to certain limits on recent contributions
Other retirement benefit plans including Public Employee Retirement Association (PERA), Minnesota State Retirement System (MSRS), and Teachers Retirement Association of Minnesota (TRA)


unlimited so long as the employee does not have a right to withdrawal of funds upon termination
Tools of trade (must be used in employment)


Workers Compensation


unlimited only if claim has not been settled or paid out (however proceeds already received can be exempted under Minnesota law)
Anything else not exempt under any other provision such as excess equity in a vehicle, cash, bank account balances, second vehicles, recreational equipment, stocks and bonds, ownership interest in a business, inheritance proceeds, claims against a business or individual, tax refunds, etc. up to $13,100 total “wildcard” / (d)(5) exemption


* These amounts are valid as of 2016 and adjust periodically. You should consult a bankruptcy attorney to analyze the available exemptions for your particular circumstances.


Bankruptcy Options if You Are Behind on Condo / Townhome Assessments

Behind on your monthly HOAs, late fees or special assessments owed to your homeowner’s association?

Under Minnesota statute, most defaulted amounts due to a homeowner’s association create an automatic lien against the individual unit, which means that these amounts remain secured against the condo or townhome even after bankruptcy. Because of this statutory lien, the association can collect against a defaulting owner either by way of initiating a lawsuit for personal liability or, less frequently, by foreclosing its lien.

Read more about Condo, Townhome and HOA Association Liens in Minnesota.

While bankruptcy typically discharges one’s personal liability for unpaid assessments as of the date the bankruptcy is filed, the automatic association lien that is created by statute still exists in spite of bankruptcy. Therefore the association retains a right to foreclose the unit either after a bankruptcy discharge is received or during bankruptcy with court approval. Because filing of bankruptcy only offers temporary relief for a defaulting condo or townhome owner who wishes to retain the property, a long term resolution of the association arrears is necessary.

Chapter 13 bankruptcy allows a defaulting homeowner as long as three to five years to repay their association for any “pre-petition” amounts due. While in chapter 13, the homeowner must stay current on the monthly HOAs and any new special assessments or they again will risk an association foreclosure of the unit for “post-petition” amounts due.

Chapter 7 bankruptcy discharges personal liability for unpaid association assessments / HOAs but will not resolve the automatic lien if the homeowner intends to keep the property.

There are options in bankruptcy if you are behind on assessments due to the association and these options vary depending on whether you intend to keep the property. If you own a condo or townhome and are considering bankruptcy to stop a foreclosure or lawsuit, it’s important to understand how bankruptcy may impact your liability for association dues, fees and other assessments, your right to continue to use common amenities, and the risks of foreclosure. Especially under these circumstances, it’s best to get advice from a bankruptcy attorney who understands the various forms of bankruptcy relief to protect your interests with regard to the property.

Attorney Lynn Wartchow is a Minneapolis / St. Paul area bankruptcy attorney representing clients in Chapter 7 and Chapter 13 consumer bankruptcy proceedings in Minnesota since 2005.Call for a free bankruptcy consultation to understand your options in Chapter 13 or Chapter 7 bankruptcy.