Personal bankruptcy can help Minnesotans with heavy debt loads get some relief and a financial fresh start. Most aspects of Chapter 13 bankruptcy proceedings are governed by federal bankruptcy rules rather than Minnesota state law, but some areas of bankruptcy are state-specific, such as where you must file your petition and which exemptions apply to your case.
Chapter 13 is a form of personal bankruptcy that involves reorganization of your debt under the terms of a three- to five-year repayment plan. Unlike Chapter 7 bankruptcy in which most debts are wiped out, Chapter 13 filers must make payments on their debts over the course of the repayment plan; debts remaining at the end of the repayment period may be wiped out if they have not been fully paid. Thus, Chapter 13 allows filers to keep their property, catch up on mortgage payments and even halt the foreclosure process on a home. The repayment plan is central to a Chapter 13 case, which may take up to five years to complete.
Filing Chapter 13
Before you file for bankruptcy in Minnesota, you must attend an approved pre-bankruptcy credit counseling course. Bankruptcy cases are handled by federal bankruptcy courts, so you must file your petition in the U.S. Bankruptcy Court for the District of Minnesota. This court has offices in Duluth, Fergus Falls, Minneapolis and St. Paul. To begin your case, you must submit a petition and several other required forms, proposed repayment plan and filing fee.
A court-appointed bankruptcy trustee manages your Chapter 13 case. He evaluates your proposed repayment plan by reviewing the forms you file, which list your creditors, assets, income and expenditures. The trustee has the authority to object to your proposed repayment plan. He will hold a “341 meeting" -- a meeting with you and your creditors -- to discuss your proposed repayment plan. At this meeting, creditors have a chance to ask you questions, but frequently do not attend.
Bankruptcy exemptions remove certain property and assets from sale in a Chapter 7 proceeding, but in a Chapter 13 case, the bankruptcy court also uses them to determine how much money you have available to pay certain creditors. Minnesota law allows you to choose either Minnesota’s exemptions or the exemptions available under federal law -- but not both. Minnesota’s exemptions tend to be more generous than the federal exemptions and include a certain amount of equity in your home, vehicles, clothing, furniture, appliances, books and other personal property.