Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In Minnesota, bankruptcy exemptions play a crucial role in both Chapter 7 and Chapter 13 bankruptcy filings. These exemptions allow individuals to keep certain property from being liquidated or claimed by creditors. The homestead exemption is particularly significant, as it protects the equity in a debtor's home. As of the knowledge cutoff in 2023, Minnesota allows debtors to choose between state exemptions and federal bankruptcy exemptions, providing flexibility in protecting assets. The state's homestead exemption can protect up to $420,000 of equity in a primary residence, or up to $1,050,000 if the property is used primarily for agricultural purposes. It's important to note that these amounts are subject to change and can vary based on legislative updates. Debtors must have owned the property for at least 1,215 days prior to filing for bankruptcy to claim the full exemption amount. Other exemptions in Minnesota cover personal property such as clothing, appliances, furniture, and tools of the trade, as well as certain amounts of insurance benefits, pensions, and public assistance benefits. An attorney can provide detailed guidance on how to apply these exemptions in a bankruptcy case and how to maximize the protection of assets.