I Have A House in Minnesota, How Can I Be Sure It’s Protected In Bankruptcy?
Minnesota Law Protects Homes From Most Debts
Minnesota began as a frontier state and has a long tradition of protecting the property of Minnesotans from Debt Collections.
The Minnesota Constitution says:
Sec. 12. property exemption.
No person shall be imprisoned for debt in this state, but this shall not prevent the legislature from providing for imprisonment, or holding to bail, persons charged with fraud in contracting said debt. A reasonable amount of property shall be exempt from seizure or sale for the payment of any debt or liability. The amount of such exemption shall be determined by law. Provided, however, that all property so exempted shall be liable to seizure and sale for any debts incurred to any person for work done or materials furnished in the construction, repair or improvement of the same, and provided further, that such liability to seizure and sale shall also extend to all real property for any debt to any laborer or servant for labor or service p
From the start, the people of Minnesota knew that peoples’ houses should be protected from seizure to pay debts. The same idea holds true in bankruptcy. In Bankruptcy, you can protect up to $450,000 in equity in a house. The equity is how much more the house is worth than the mortgage against it.
Most people have much less equity than $450,000 in their homes so it is protected.
What kinds of debts or loans can take a house in Minnesota?
There are only a few types of debts or loans that can take a house in Minnesota. Things like credit cards, debt collectors, medical bills, and payday loans or personal loans cannot take a house.
- MORTGAGES – Mortgages can foreclose on a house if the borrower stops making the mortgage payments. The borrower has some time frames to come up with the money and stop the foreclosure
- MECHANIC’S LIENS – but only if the contractor is very fast to foreclose. A mechanic’s lien sounds like the sort of thing which goes against a car when you don’t pay the repair shop, but in reality it is a lien against a house for an unpaid contractor or supplier of building materials. Mechanic’s liens can only foreclose for a short window of time.
- HOMEOWNER’S ASSOCIATION LIENS – HOAs can foreclose for unpaid dues or assessments. They have lots of power to do this because they can add attorney’s fees onto the balance.
- PROPERTY TAXES – Minnesota counties can foreclose on houses for unpaid property taxes. Chapter 13 bankruptcy allows people to catch up on property taxes over 5 years with a more affordable payment plan.
How Does A Judgment Work With a
House In Minnesota?
In Minnesota, a court judgment, becomes a lien against any houses or land in the county where the judgment is docketed. This lien lasts for 1o years and can be renewed for another 10 years. 20 years is a very long time! A judgment cannot be used to foreclose on a house, but if you refinance or sell your house without filing bankruptcy, then some money will get taken from the refi or the sale proceeds to pay off the judgment.
If you file bankruptcy, then the bankruptcy removes the judgment from your house and you can sell or refi without losing any of the equity in your house. This is because bankruptcy is more powerful than a judgment and in Minnesota, home equity is generally not supposed to be used to pay off debts. It is unfortunate that to truly protect the house from a creditor, a person has to file bankruptcy, but that is the only way to get rid of a judgment without paying it off.
If you want a free lawyer consultation to talk about saving your house, then call us at (612) 824-4357. We will analyze your financial situation for free and recommend a best course of action for dealing with debt.