In In re Nascene, No. 20-41025, 2020 WL 6875946, slip op. (Bankr. D. Minn. October 8, 2020) (Ridgway, C.J.), the bankruptcy court held that wages exempt from garnishment under Minn. Stat. § 550.37, subd. 13 are, under the plain language of the statue, exempt regardless of whether held in a financial institution or as cash. About a week before filing his bankruptcy petition, the debtor received $500 in wages and deposited it in to a checking account. The day before filing the petition, the debtor withdrew $200 in cash. After the meeting of creditors, the debtor amended his schedules to claim an exemption in $150 of the cash under Minn. Stat. § 550.37, subd. 13, which generally provides that 75% of disposable earnings is unequivocally exempt as a matter of right. The trustee objected, arguing that cash does not qualify under the statute.
Although the bankruptcy court agreed with the trustee that the statute does not expressly provide an exemption in cash, the bankruptcy court held that cash could also be wages that qualify under the statute so long as the debtor meets his burden of proof. The bankruptcy court also agreed that an exemption under Minn. Stat. § 550.37, subd. 13 requires that the funds be traceable to earnings but rejected the trustee’s argument that cash cannot be traced because of a lack of a paper trail.
The court reviewed the amendment history of the statute to note that the sentence stating that earnings “shall also be exempt for 20 days after deposit in any financial institution,” was added in 1976 as an accompaniment to the exemption language, not as a limiting requirement. The court interpreted the sentence as ensuring that the exemption continues for a period of time after the funds are deposited but not otherwise changing the nature of the exemption for wages in whatever form they exist. In fact, the court opined that reading into the statute a requirement that the wages be deposited in a financial institution would render superfluous language in the statute that such earnings are exempt “as a matter of right, whether claimed or not by the person to whom due” and “may not be waived.” Thus, earnings are exempt as long as the debtor satisfies his burden to show that the money can be traced to the exempt portion of earnings.
Co-Editors in Chief
Alexander J. Beeby, Larkin Hoffman Daly & Lindgren Ltd.
Kesha Tanabe, Tanabe Law