Minnesota Collection Laws

Highlights

  • The statute of limitations for most Minnesota debts is 6 years.
  • A shorter statute of limitations applies in some circumstances.
  • Judgments become a lien on a debtors' property automatically.
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Learn Minnesota's Rules For Garnishment, Liens, and Foreclosure

A lender, collection agent or law firm that owns a collection account is a creditor. The law gives creditors several means of collecting delinquent debt. But before a creditor can start, the creditor must go to court to receive a judgment. See the Bills.com article Served Summons and Complaint to learn more about this process.

The court may grant a judgment to the creditor. A judgment is a declaration by a court the creditor has the legal right to demand a wage garnishment, a levy on the debtor’s bank accounts, a lien on the debtor’s property, and in some states, ask a sheriff to seize the debtor’s personal property. The laws calls these remedies. A creditor granted a judgment is called a judgment-creditor. Which of these tools a judgment-creditor will use depends on the circumstances. We discuss each of these remedies below.

Garnishment

The most common remedy judgment-creditors use to enforce judgments is wage garnishment. Here, the judgment-creditor contacts the debtor’s employer and require the employer to deduct a certain portion of the debtor’s wages each pay period and send the money to the creditor. However, several states — Texas, Pennsylvania, North Carolina, and South Carolina — do not allow wage garnishment for the enforcement of most judgments. In several other states, such as New Hampshire, wage garnishment is not the “preferred” method of judgment enforcement because, although possible, it is a tedious and time consuming process for creditors.

In most states, creditors are allowed to garnish between 10% and 25% of your wages, with the percentage allowed being determined by each state. Minnesota exempts 75% of your net wages. Creditors may not take any of your wages for six months after you received public assistance based on need. This includes the Minnesota Family Investment Program (MFIP), Emergency Assistance (EA), Work First Program, Medical Assistance (MA), General Assistance (GA), General Assistance Medical Care (GAMC), Emergency General Assistance (EGA), Supplemental Security Income (SSI) and Energy Assistance (EA).

Garnishment of Social Security benefits or pensions for consumer debt is not allowed under federal or Minnesota law.

If you reside in another state, see the Bills.com Wage Garnishment article to learn more.

Levy Bank Accounts

Some states like Minnesota call bank account levy account garnishment. A levy means the creditor has the right to take non-exempt money in a debtor’s account and apply the funds to the balance of the judgment. Again, the procedure for levying bank accounts, as well as what amount, if any, a debtor can claim as exempt from the levy, is governed by state law. Many states exempt certain amounts and certain types of funds from bank levies, so a debtor should review his or her state’s laws to find if a bank account can be levied.

Minnesota law does not offer an account exemption amount that applies to all Minnesota residents. Therefore, it is possible for a judgment-creditor to empty your bank account, unless one of the following exemptions apply. If you deposit your public assistance in a bank account, creditors cannot garnish your account for 60 days. Some pensions and retirement accounts are protected under Minnesota law, including those with a present value of $69,000 or less. Two months of Social Security benefits may not be levied from any US resident's account.

Lien

A lien is an encumbrance — a claim — on a property. For example, if the debtor owns a home, a creditor with a judgment has the right to place a lien on the home, meaning that if the debtor sells or refinances the home, the debtor will be required to pay the judgment out of the proceeds of the sale or refinance. If the amount of the judgment is more than the amount of equity in your home, then the lien may prevent the debtor from selling or refinancing until the debtor can pay off the judgment.

In Minnesota, a judgment lien can be attached to real estate or non-exempt personal property. Here are property exemption amounts for Minnesota residents, effective through June 30, 2014:

  • A homestead with a value of $390,000 or less is protected from creditors’ claims unless the creditor has a mortgage or an actual lien against the property for improvements made to the property.
  • An automobile with a value of up to $4,600 is also exempt. The value protected is $46,000 if the vehicle has been modified at a cost of at least $3,450 to accommodate a disability.
  • A mobile home is exempt if the debtor lives in the home.
  • Personal belongings with a value of up to $10,350 are also protected.

Every Minnesota judgment that requires the payment of money becomes a lien upon the judgment-debtor's real property (subject to Minnesota exemption) within the county where the judgment was docketed. The lien survives as long as the judgment is valid. Judgments may be moved and docketed in other counties (Minn. Stat. § 548.09).

If you reside in another state, see the Bills.com Liens & How to Resolve Them article to learn more.

Minnesota Statute of Limitations

Each state or commonwealth has its own statute of limitations on civil matters. Here are some of Minnesota’s statutes of limitations for consumer-related issues:

Account/Type Years Statute
Minnesota statutes of limitations. Source: Bills.com
Credit card 6 Minn. Stat. § 541.05
Spoken contract 6
Written contract 6
Judgment Lien 10 Minn. Stat. § 548.09
Judgment* 10
* Can be renewed for an additional 10 years. (Minn. Stat. § 541.04)

If there is question as to which state’s statute of limitations applies, the law of the state governing the contract (including that state’s limitation periods) apply (Minn. Stat. § 541.30 through 541.36). Consult with a Minnesota lawyer who has civil litigation or consumer law experience if the contract you signed is with a company headquartered outside of Minnesota because a shorter statute of limitation may apply.

When the statute of limitations clock starts depends on the circumstances and the particular statute. Generally, it starts when the action accrues, which means the date of breach. For credit card debt, this means the date the payment was missed. A statute of limitations clock may be paused (called "tolled") under some circumstances (Minn. Stat. § 541.13).

Minnesota Foreclosure

A lender may foreclose judicially or non-judicially in Minnesota. The common method is non-judicial, which typically takes 270 days or more. Lenders may pursue a borrower to collect a deficiency balance relating to mortgage foreclosure. However, a jury must set the fair market value of the property. Because a trial is required to set the value, Minnesota is effectively a non-recourse state (Minn. Stat. § 582).

Recommendation

Consult with a Minnesota lawyer who is experienced in civil litigation to get precise answers to your questions about liens, levies, garnishment, and foreclosure.

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