Minnesota Debt Relief: The Tools You Need to Escape the Debt Trap

An estimated 5,711,471 people live in Minnesota. The cost of living in the state is slightly lower than the national average, and the median household income is $77,706.

Yet, many residents still struggle financially. The state’s poverty rate is 9.3% which, while lower than the official national poverty rate of 11.6%, is still significant. The average household debt is $55,380 — slightly higher than the national average.

Although debt is a concern for many, you have options if you need Minnesota debt relief or other financial assistance in the state.

Minnesota debt statistics

Here are some of the most recent statistics for debt and credit in Minesota:

  • Average household debt: $55,380
  • Average student loan debt: $33,604
  • Average credit score: 742
  • Median mortgage payment: $1,547
  • Bankruptcies in 2021: 1,216
  • Personal income: $77,706
  • Child poverty: 11.2%
  • Unemployment: 2.9%

Debt collection laws in Minnesota

Although Minnesota does not have state-specific debt collection laws, debt collectors must abide by the Fair Debt Collection Practices Act (FDCPA). Under this act, debt collectors are prohibited from engaging in various activities, including:

  • Using abusive, deceptive, manipulative, or threatening tactics to collect a debt
  • Harassing a borrower about a debt
  • Contacting a borrower’s friends, family, or employer about a debt (except in specific cases such as to get in touch with the borrower)
  • Claiming the borrower owes more than they do, or that they owe a debt that isn’t theirs
  • Trying to contact a borrower outside of acceptable hours or when told not to
  • Claiming they will take legal action they do not intend to take
  • Pretending to be someone they’re not (ex. legal or government official)

If you believe a debt collector has violated the FDCPA, or your rights as a consumer, report a violation with the Minnesota State Attorney General’s Office.

Debt relief options for Minnesota residents

Here are some of the top forms of Minnesota debt relief for residents struggling with debt:

  • Debt settlement: With debt settlement, you’ll typically go through an agency that will negotiate with your creditors to reduce how much you owe on a debt. This can take a few years but could help you get out of debt much sooner.
  • Debt consolidation loans: A debt consolidation loan is a large loan that lets you combine several high-interest debts (ex. credit cards or personal loans) into one with a fixed interest rate and monthly payment. This could save you money in the long run, as well as make it easier to pay off what you owe.
  • Debt management plan: A DMP is a 3- to 5-year program offered through nonprofit credit counseling agencies. With one, you may be able to reduce monthly payments, lower interest rates, or get certain fees waived.
  • DIY plans: Similar to debt settlement, a DIY plan may be a good option if you’re good at negotiating and don’t mind dealing with creditors or debt collectors. With one, you could potentially get monthly minimums or interest rates lowered or waive late fees.
  • Bankruptcy: Filing for bankruptcy is typically a last resort, but it could help if you need to get back on your feet financially. Speak with a bankruptcy attorney about this option and whether you’re eligible for Chapter 7 or Chapter 13.

Debt settlement in Minnesota

Although you can do debt settlement yourself, a debt settlement agency could increase your odds of success. When you work with an agency, a professional will try to get your creditors to reduce your debts — sometimes by around 50% or more.

While they do this, you’ll need to start making payments into a secure account. Once an agreement has been reached, the agency will pay off your debt (at the newly settled amount) using that money.

During the process, you may be asked to stop making payments on the debts you’re trying to settle. This could result in late charges or hurt your credit. But it could also increase your success rate since, at the end of the day, creditors want to get paid.

Debt settlement isn’t right for everyone, and it’s not without risk. However, it could be better if you can’t keep up with payments or regular bills and your only other option is bankruptcy.

A debt settlement plan can help you pay off many types of unsecured debts, including:

  • Unsecured credit cards
  • Department store cards
  • Personal lines of credit
  • Personal loans
  • Student loans in default
  • Old judgments

Minnesota debt relief companies

If you’re interested in going through a company for debt relief or debt settlement in Minnesota, here are some options:

Debt settlement attorneys

Need an attorney in Minnesota for debt settlement, bankruptcy, or other debt relief? Here are a few of the top-rated ones:

Debt resources for Minnesota residents facing hardship

Minnesota offers many debt-related resources. This includes charitable, nonprofit, and federal and state organizations that help with things like rent and utilities, childcare costs, and healthcare.

The state also has food banks and food pantries located in different cities to help combat hunger and food insecurity. These resources, along with programs like the Supplemental Nutrition Assistance Program (SNAP), are meant to help the 338,000 Minnesotans — one in 17 people — facing hunger.

Here’s a list of the main food banks in Minnesota:

Income and employment in Minnesota

The current unemployment rate in Minnesota is 2.9%, making it one of the lowest in the country. In May 2020, the state’s unemployment rate was 11.1%.

Minnesota ranks 18th in terms of job creation and has had a job growth of 2.952.70 (in the thousands). To help with this, Minnesota has created the Job Creation Fund to incentivize small businesses to hire more employees.

The North Star State doesn’t have right-to-work laws, meaning employees must join a labor union if part of a unionized workforce. The state is an employment-at-will state, however. This means that an employee can quit at any time without reason. It also means that an employer can also fire an employee with or without cause, which could reduce job security.

How to apply for unemployment benefits in Minnesota

You can apply for unemployment benefits in one of two ways:

  • Online: Go to the official unemployment website, choose “Applicants,” and click “Apply for Benefits.
  • Via phone: Call the office Monday through Friday from 8:00 a.m. to 4:30 p.m. (non-holidays only). There are two main numbers: (651) 296-3644 (Twin Cities) and (877) 898-9090 (Greater Minnesota)

As part of the application, you’ll need to provide some information, such as the reason why you’re unemployed and your recent work history. The Minnesota Unemployment Insurance department will also cross-reference this information with your employer.

If eligible for benefits, you’ll receive up to 50% of your average weekly earnings each week for a maximum of $857. You’ll need to recertify for benefits each week to continue receiving them.

Be sure to apply for benefits as soon as possible — ideally in the week before you lose your job or your hours are significantly reduced.

Banking and taxes in Minnesota

For 2023, Minnesota has a graduated personal income tax ranging from 5.35% to 9.85%. The corporate income tax rate is capped at 9.90%.

The state’s sales tax rate is 6.875%, though some regions will charge up to an additional 2%.

About 1.5% of Minnesota households are unbanked. This means that nobody in the home has a checking or savings account with a traditional bank or credit union. This number may be higher among certain minority groups or those living in rural areas.

Minnesota housing market

The average home value in Minnesota is $307,201 — up 3.6% over one year. This is lower than the national average. The owner-occupied housing rate is 72.3%.

The median mortgage payment in Minnesota is $1,547. In comparison, the typical rent is $1,081.

Right now, Minnesota’s Homeowners Assistance Fund is accepting applications from low-income homeowners who need financial assistance. This federally funded program is designed to help those at risk of foreclosure, mortgage default, or displacement due to the COVID-19 pandemic. The program can also help with certain property expenses and mortgage reinstatement fees.

Retirement in Minnesota

To live comfortably during retirement, Minnesotans need to have $703,988 set aside. However, many residents don’t have anywhere near that amount. One study found that some people have just $109,000 set aside for retirement.

Average Minnesota insurance premiums

A standard homeowners insurance premium in Minnesota costs $1,785 a year for $250,000 dwelling coverage. This is over $400 higher than the U.S. standard.

Meanwhile, the average full-coverage car insurance premium costs $1,643 a year in Minnesota. This is almost the same as the national average.

Payday lending status in Minnesota: Legal

Payday loans are prohibited in many states, but they’re legal in Minnesota. Here’s an example of what a typical payday loan looks like in the state:

  • Maximum loan amount: $350
  • Maximum Interest Rate (APR): 390%
  • Minimum loan term: N/A
  • Maximum loan term: 30 days

Statute of limitations on debt in Minnesota

The statute of limitations on debt in Minnesota ranges from four to six years.

  • Medical debt: 6 years
  • Credit card: 6 years
  • Auto loan debt: 4 years
  • State tax debt: 5 years

It’s possible to restart the statute of limitations by making a payment or using the account. Keep this in mind if you’re trying to ride it out or are being harassed by debt collectors.

State hardship programs

Minnesota has more than debt relief programs. It also offers various state-specific and federal hardship relief programs, including:

  • Minnesota Housing: Minnesota Housing helps residents find affordable rental housing based on their income. A similar program is the Family Homeless Prevention & Assistance Program, which helps people facing homelessness find housing.
  • Single Family Housing Repair and Grants Program: This program, or the Section 504 Home Repair program, offers loans to very low-income homeowners who need to modernize or repair their homes. It also offers grants to very low-income homeowners who are elderly.
  • Low Income Home Energy Assistance Program: This energy assistance program helps low-income residents — whether they’re renters or homeowners — with their energy and water bills.
  • Children’s Health Insurance Program (CHIP): Like Medicaid, CHIP offers low-cost or free health coverage to eligible children from low-income households. This coverage covers things like routine checkups, immunizations, and basic dental care.
  • Supplemental Nutrition Assistance Program (SNAP): SNAP, or Food Stamps, provides low-income households with financial assistance to help them pay for nutritious food. It’s a supplement, so it may not cover all grocery costs.
  • Combined Application Form (CAF): CAF makes it easier for people who are eligible for multiple programs to apply at once. It can help residents apply for things like Refugee Cash Assistance (RCA), Minnesota Family Investment Program (MFIP), SNAP, and Group Residential Housing (GRH) benefits.
  • WIC: The Women, Infants, & Children program is another supplement for food costs. It’s geared toward low-income women with children or who are pregnant. WIC also offers nutrition education, counseling, and referrals to health or social services.
  • Organization for Refugees & Immigrants: This resource is designed to help refugees and immigrants assimilate into Minnesotan society for a more equitable, diverse society.
  • Pro bono help: This site helps individuals who need free or low-cost legal help find referrals and related resources.

Help for Veterans

Over 327,000 veterans call Minnesota home — that is around 6% of the state’s population. The Minnesota Department of Veterans Affairs has resources that can help vets find employment or other financial help.

Facilities in Minnesota

If you need a VA facility in Minnesota, here are some of the biggest ones:

  • Minneapolis VA Medical Center: One Veterans Drive Minneapolis, MN 55417-2309; (612) 725-2000 (Main) or (612) 467-4010 (Mental Health)
  • Saint Paul Vet Center: 101 5th Street East Suite 101 Saint Paul, MN 55101; (651) 644-4022
  • Fort Snelling National Cemetery: 7601 34th Avenue, South Minneapolis, MN 55450; (612) 726-1127
  • Maplewood VA Clinic: 3100 Kennard Street, Kennard Professional Building, Suite 100 Maplewood, MN 55109-5434; (651) 225-5420 (Main) or (612) 467-4010 (Mental Health)
  • St. Cloud VA Medical Center: 4801 Veterans Drive St. Cloud, MN 56303-2015; (320) 252-1670 (Main) or (320) 252-1670 (Mental Health)
  • Anoka Vet Center: 700 East Main Street Anoka, MN 55303; (763) 503-2220
  • St. Paul Regional Office: 1 Federal Dr, St Paul, MN 55111; (800) 827-1000

Employment resources for Veterans

In addition to Minnesota’s Department of Veterans Affairs unemployment resources, here are a few others to consider:

  • CareerOneStop — one-stop shop with career resources, job advice, and a virtual search portal
  • MilitaryHire.com — helps connect veterans with civilian jobs that let them use their military skills
  • VeteranRecruiting.com — virtual career fairs for vets and eligible spouses
  • Helmets to Hardhats — nonprofit program that helps veterans and other military personnel transition into the civilian workforce
  • Hiring Our Heroes — online hiring events, career training opportunities, fellowship programs, and more
  • My Next Move — works with veterans to find a civilian job
  • Warriors to Work — connects veterans and companies to help them find work

The bottom line

Whether you’re seeking Minnesota debt relief or financial assistance in other ways, you have options. This includes debt settlement (through an agency or DIY), debt consolidation, and credit counseling. It also includes state- and federally-funded resources that can help with things like food costs, legal assistance, healthcare, and housing.


How long can a debt be collected in Minnesota?

In Minnesota, most debts are collectible for up to six years.

When does the statute of limitations begin in Minnesota?

It begins on the date of your last payment or account activity, whichever happened most recently.

Am I responsible for my spouse’s debt if I get divorced in Minnesota?

If you or your spouse incurred the debt during the marriage, both parties will typically be held responsible for paying it off. If your spouse acquired the debt before or after the marriage, it will generally be their responsibility alone.

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