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Minnesota Debt Relief: Your Guide to State Laws and Managing Debt

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Nicknamed the Land of 10,000 Lakes, Minnesota (which has 11,842 lakes to be exact), is known for extreme winters, the Twin Cities and its proximity to Canada.

But the state has other distinctions to claim. Minnesota has the third-highest amount of student loan debt per capita in the nation, according to our research. And the average credit card debt per capita is $3,290 — slightly higher than the nation’s average of $3,220.

Consequently, some Minnesotans may encounter difficulty managing their debt. If you are one of them, there are numerous resources available to you.

In this article, we’ll cover what you need to know about Minnesota debt relief, including federal and state laws that protect you as a consumer and some strategies and tips to help you alleviate your financial struggles.

Debt in Minnesota: At a glance

Minnesota debt
Type Per capita balance, 2018 Rank out of 50 states (1 is highest) Change from 2017 (%) U.S. per capita balance
Credit card debt $3,290 18 2.8% $3,220
Student loan debt $6,280 3 3.0% $5,390
Auto debt $4,130 39 4.6% $4,700
Mortgage debt* $37,460 13 1.4% $33,680
*First-lien debt only
Source: Federal Reserve Bank of New York, March 2019

Debt collection in Minnesota

If you are struggling with past-due or delinquent debt that’s been reported to a collection agency, you should be familiar with the federal and state laws that protect consumers from unfair debt-collection practices.

The Fair Debt Collection Practices Act (FDCPA) is a federal law that establishes standards for how third-party debt collectors may interact with consumers. It also outlines consumers’ rights.

Some protections and rights under the FDCPA include:

  • Debt collectors can contact you by mail, fax, email, text message or telephone. Collectors may only contact you between the hours of 8 a.m. and 9 p.m.
  • Debt collectors cannot contact you at your job if you’ve told them you do not want to receive calls there.
  • Debt collectors can contact people you know to find your contact information or place of employment, but they cannot say that you owe a debt or, unless asked, that they work for a debt collection agency.
  • If you have a lawyer, debt collectors cannot contact anyone about your debt except your lawyer.
  • You can dispute a debt you believe you do not owe or ask for verification of the debt. The collector cannot proceed with their collection efforts until they send you written confirmation of the debt.
  • Debt collectors cannot harass you, make false claims, threaten you physically or violently or use obscene language.
  • Debt collectors must stop contacting you if you notify them in writing to stop. However, they still can pursue further legal action.

Learn more about consumer protections and rights under the FDCPA.

In addition to the FDCPA, state-specific guidelines and laws exist. Minnesota debt relief laws are fairly favorable for debtors and state the following:

  • If you are a homeowner, the state’s homestead exemption protects up to $420,000 of your home’s equity should you file for bankruptcy or if a creditor successfully sues you.
  • If you own a car, up to $4,600 of the car’s equity is protected.
  • If a judgment is made against you that results in an order to withdraw funds from your bank accounts, all the funds could be emptied, up to the amount of the debt.
  • If a judgment is made against you that results in wage garnishment, up to 25% of your disposable income (your wages, less mandatory deductions) may be garnished.

Responding to collection letters

If a debt collection agency sends you a letter or notice, you may be tempted to ignore it. But doing this can lead to the agency taking further action against you.

Keep these tips in mind as you interact with debt collectors.

  • Request validation. You have 30 days upon receiving a collection notice to dispute the debt or request validation. The collector must send you a copy of the bill or other proof the debt is yours.
  • Document your contact. Keep a log of your communication with the collection agency including any phone calls. Make a note of the date of each interaction, who you spoke with and the outcome of the conversation.
  • Respond to court summonses. If you receive a court summons, do not ignore it. Minnesota’s law states you must respond within 20 days. It’s best to contact an attorney to discuss how to proceed. The state attorney general’s office provides these tips on hiring an attorney, including finding free legal aid.
  • Do not succumb to pressure. Do not agree to any payment arrangement that is beyond what you can handle.
  • Get it in writing. If you agree to a payment arrangement, get it in writing before starting to make payments.

If you suspect a debt collector is violating laws or you are having problems with a collection agency, contact the Minnesota Attorney General’s Office.

Office of Minnesota Attorney General

  • 445 Minnesota Street, Suite 1400
  • St. Paul, MN 55101
  • 651-296-3353 (Twin Cities calling area)
  • 800-657-3787 (Outside the Twin Cities)
  • 800-627-3529 (Minnesota Relay)

Additionally, you should file a complaint with the following agencies:

Minnesota Department of Commerce

  • 85 7th Place East, Suite 280
  • St. Paul, MN 55101
  • 651-539-1500 (local calling area)
  • 800-657-3602 (Greater Minnesota only)

Federal Trade Commission (FTC)

Consumer Financial Protection Bureau (CFPB)

Understanding Minnesota’s statute of limitations

In addition to federal and state laws that govern debt collection practices, Minnesota’s statute of limitations dictates the number of years a debt collector can sue you for unpaid debts. The statute of limitations varies by type of debt.

Minnesota Statutes of Limitations on Debt
Mortgage debt 6 years
Medical debt 6 years
Credit card 6 years
Auto loan debt 4 years
State tax debt 5 years (to file a lien. Lien remains in place for 10 years.)


As you can see in the chart above, debt collectors in Minnesota have between four and six years from the last payment to pursue legal action, depending on the type of debt. After the statute of limitations runs out, the debt becomes known as “time-barred.”

Collectors can still contact you and attempt to collect on time-barred debts, but legally they cannot sue you or take any other action beyond their own collection efforts. Keep in mind that if you make payments on these types of debts, you’ll restart the clock on the statute of limitations, effectively lengthening the time you are susceptible to lawsuits.

If a collection agency sues you for a time-barred debt, do not ignore the summons. You should still contact an attorney. In the meantime, do your best to familiarize yourself with the statute of limitations for each type of debt as you interact with collection agencies.

Minnesota debt relief programs

In addition to getting to know some of Minnesota’s debt relief laws, also consider contacting an organization that can help you navigate your situation. Here are a few options:

Payday lending laws in Minnesota

Payday loans are short-term, high-interest loans that some lenders offer to borrowers who need money between paychecks. They are a costly way to borrow money and should be avoided, but unfortunately, many consumers fall into a cycle of having to rely on them.

In Minnesota, payday loans under $350 are known as consumer small loans, and loans between $350 and $1,000 are called consumer short-term loans.

There are 115 licensed lenders in Minnesota offering these two types of payday loans. Additionally, there are online lenders, who must also be licensed by the state and adhere to the same guidelines and laws as physical lenders.

Whether you have already taken out a payday loan or you’ve previously thought about it, here’s what you need to know about Minnesota’s payday lending laws.

  • Maximum loan amount: $350 (consumer small loans); $1,000 (consumer short-term loans)
  • Maximum loan term: not to exceed 30 calendar days (consumer small loans); minimum payment of at least 25% of the loan amount due within 60 days (consumer short-term loans)
  • Finance charges:
Loan amount Finance charge
$50 or less $5.50
$50.01 – $100 10%, plus a $5 administrative fee
$100.01 – $250 7% (with a minimum of $10), plus a $5 administrative fee
$250.01 – $350 6% (with a minimum of $17.50), plus a $5 administrative fee
$350.01 – $1,000 No more than 33% annual percentage rate (APR), plus a $25 administrative fee
Sources: The National Conference of State Legislatures and the Office of the Minnesota Attorney General


As the table above shows, the maximum rate a lender can charge on loans up to $350 is 10%. But keep in mind that’s the interest rate, not the APR. The short terms of payday loans drive the APR up significantly, making them one of the most expensive ways to borrow money. For example, the APR on a 14-day $100 loan is 390%.

If you are stuck in the cycle of taking out payday loans, the state Attorney General’s office provides this guide to understanding payday loans. Additionally, St. Paul-based Exodus is a non-profit organization that helps consumers break the payday loan cycle.

Tips to tackle debt in Minnesota

When trying to clean up your debt, it can be challenging to know which path to take. The right debt relief solution for you depends on your situation. Here is an overview of some options.

Consolidate your debt

Debt consolidation is the process of taking out a new loan to pay off multiple existing debts, leaving only one debt to manage.

Consumers can consolidate credit card debt, medical debt, personal loans, student loans and other unsecured debt. The multiple ways to consolidate debt include using a personal loan, a home equity loan, a home equity line of credit (HELOC), a new credit card, or even taking out a 401(k) loan.

Consolidating debt can lower the total amount of debt and interest paid, if high-interest debt is consolidated at a lower rate. It can also help some consumers feel less overwhelmed by their situation, as it reduces the number of creditors and bills to manage.

However, debt consolidation does not actually reduce the amount of debt owed. It simply moves the debt, which can give consumers a false sense that they have paid it off. Often, consumers find themselves in deeper debt after consolidating their loans.

Additionally, in the case of using a HELOC or home equity loan to consolidate debt, you would put your home in jeopardy if you have trouble making the payments.


Some debts can be refinanced, meaning the creditor will reset the terms of the debt, changing either the interest rate or the duration of the loan, or, in some cases, both. This strategy typically applies to a secured debt such as a home or auto loan.

In the case of a home loan, a cash-out refinance is also an option. With a cash-out refinance, you borrow against the equity in the home and walk away with cash to pay off other debts.

Refinancing can significantly lower your monthly payment, but it could also increase the amount you pay over the life of the loan and extend the amount of time you’re in debt. And in the case of refinancing a home, you will need to pay closing costs.

If you are juggling student loans, you may also be able to refinance them, even though they are unsecured debt. Check with your lender to see if it has refinance or consolidation options, or consider refinancing student loans with a third-party lender, although you’re likely to lose the flexible repayment options of federal student loans. Note that if you decide to refinance your federal student loans you’ll no longer be eligible for loan forgiveness programs.

Use a balance transfer card

Another option consumers have is to take advantage of a 0% or other low-interest introductory rate on a balance transfer credit card. With this strategy, you can pay down high-interest credit card balances with little or no interest charges.

Like debt consolidation, this can reduce the amount of interest paid as well as streamline the number of credit card payments to manage. But if you’re unable to pay the balance on the new card before the promotional rate ends, you may not save any money and potentially could pay more in interest.

Also, like debt consolidation, you could find yourself in deeper debt if you’ve freed up the balances on credit cards without addressing the root causes that led you to overextend yourself.

Credit counseling

Credit counseling can help consumers address their financial problems and establish a plan for managing their money better.

There are several non-profits as well as for-profit agencies or individuals that provide credit counseling. The NFCC, local housing authorities and community organizations are all great places to find a counselor.

Some counseling agencies may charge a fee, but many offer resources at no charge.

Debt management plan

Working with a credit counselor could lead to entering a debt management plan (DMP), depending on your situation. If you enter a DMP, the counselor will help you arrange a payment plan with your creditors.

Typically, you would close the accounts that are a part of the DMP and instead of making payments to your creditors, you deposit money into a separate bank account from which the counselor pays your creditors.

These arrangements can help consumers who are so overwhelmed by their situation that their inaction makes it worse. However, these plans are costly and the fees you pay may be better used to pay down your debt further.

Negotiate with your creditors

An often-overlooked solution to tackling your debt is to communicate and negotiate with your creditors directly. The idea may seem daunting, but most creditors are willing to work with you. Here are some tips for negotiating your own debt settlement.

Filing for bankruptcy in Minnesota

Another option some consumers may choose to pursue is filing for bankruptcy. The most common types of bankruptcy for consumers are Chapter 13, a structured repayment plan, and Chapter 7, a complete bankruptcy option in which your assets are liquidated, or sold, and used to pay your creditors.

Filing for bankruptcy should not be taken lightly and should be seen as a last resort after reviewing your options and seeking advice from a professional. While it can give you a fresh start, bankruptcy comes at a high cost, including remaining on your credit report for seven to 10 years.

The Minnesota state Attorney General’s office provides this guide to understanding bankruptcy.

The bottom line

When you’re facing debt, it is natural to feel hopeless about your situation. But consumers who take the time to research and educate themselves will come out ahead.

Whether you’re dealing with responding to debt collectors or looking into debt relief options in Minnesota, familiarizing yourself with the laws and resources covered here will help you choose a course of action with confidence.

The information in this article is accurate as of the date of publishing.


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