The bankruptcy law requires all bankruptcy debtors to “schedule” (list) the personal property they own, and if they so choose, to protect, their personal property by claiming an exemption in the property. Minnesota is one of 16 states that allow bankruptcy debtors to choose between the Federal Bankruptcy Code’s exemptions or the exemptions provided in state law (as well as federal non-bankruptcy law).
Much of the property that is identified as exempt in the Bankruptcy Code is also exempt under Minnesota State law. And on the face of it, that’s true for musical instruments that belong to a bankruptcy debtor. Section 522(d)(3) exempts a debtor’s interest in “musical instruments” up to a value of $625 in each instrument.
Minnesota Statute Section 550.37 subdivision. 2 also specifically exempts musical instruments. So what’s the issue? There’s no dollar limit on the exemption under Minnesota State law - the statute simply says that musical instruments are exempt. And in 1987 a creditor of a bankruptcy debtor that owned a fairly valuable violin objected to the exemption claimed in the violin. The creditor’s argument was that the Minnesota Constitution provided that a “reasonable” amount of property shall be exempt from collection, and that having an exemption without a dollar limit on the value that could be claimed as exempt meant that this exemption was unreasonable - and thus unconstitutional.
The bankruptcy court agreed with the creditor. Without a dollar limit established by the State Legislature, the subdivision exempting musical instruments was unconstitutional, and so could not be enforced.
So people looking at filing a bankruptcy case should be aware that if they own a musical instrument - whether it’s a guitar, a piccolo, a bassoon or any other kind of instrument, using state law to protect property will not protect that musical instrument - but that using the Bankruptcy Code’s exemptions likely will.
What should a potential bankruptcy debtor do if the debtor owns a musical instrument? The first thing to do is to speak with an attorney who can help navigate through these issues - like the attorneys at Kain & Scott. Contact us to discuss this, or any other potential exemption issue.
CONCLUSION
When the time is right, or when you are ready, reach out to Minnesota’s LARGEST Chapter 7 and 13 Bankruptcy website at www.kainscott.com. You will be so glad you did!
