1.1                          A bill for an act
  1.2             relating to family law; child support; providing that 
  1.3             life insurance proceeds are income to the beneficiary 
  1.4             for purposes of determining a child support 
  1.5             obligation; modifying the debtor's exemption for life 
  1.6             insurance proceeds in the case of a child support 
  1.7             obligation; amending Minnesota Statutes 1996, sections 
  1.8             550.143, subdivision 3; and 550.37, subdivision 10; 
  1.9             Minnesota Statutes 1997 Supplement, section 518.54, 
  1.10            subdivision 6. 
  1.11  BE IT ENACTED BY THE LEGISLATURE OF THE STATE OF MINNESOTA: 
  1.12     Section 1.  Minnesota Statutes 1997 Supplement, section 
  1.13  518.54, subdivision 6, is amended to read: 
  1.14     Subd. 6.  [INCOME.] "Income" means (1) any form of periodic 
  1.15  payment to an individual including, but not limited to, wages, 
  1.16  salaries, payments to an independent contractor, workers' 
  1.17  compensation, reemployment insurance, annuity, military and 
  1.18  naval retirement, pension and disability payments; or (2) the 
  1.19  proceeds of a life insurance policy, whether paid in 
  1.20  installments or in a lump sum.  Benefits received under Title 
  1.21  IV-A of the Social Security Act are not income under this 
  1.22  section. 
  1.23     Sec. 2.  Minnesota Statutes 1996, section 550.143, 
  1.24  subdivision 3, is amended to read: 
  1.25     Subd. 3.  [EXEMPTION NOTICE.] If the levy is on funds of a 
  1.26  judgment debtor who is a natural person and if the funds to be 
  1.27  levied are held on deposit at any financial institution, the 
  1.28  judgment creditor or its attorney shall provide the sheriff with 
  2.1   two copies of an exemption notice, which must be substantially 
  2.2   in the form set forth below.  The sheriff shall serve both 
  2.3   copies of the exemption notice on the financial institution, 
  2.4   along with the writ of execution.  Failure of the sheriff to 
  2.5   serve the exemption notices renders the levy void, and the 
  2.6   financial institution shall take no action.  However, if this 
  2.7   subdivision is being used to execute on funds that have 
  2.8   previously been garnished in compliance with section 571.71, the 
  2.9   judgment creditor is not required to serve additional exemption 
  2.10  notices.  In that event, the execution levy shall only be 
  2.11  effective as to the funds that were subject to the prior 
  2.12  garnishment.  Upon receipt of the writ of execution and 
  2.13  exemption notices, the financial institution shall retain as 
  2.14  much of the amount due under section 550.04 as the financial 
  2.15  institution has on deposit owing to the judgment debtor, but not 
  2.16  more than 110 percent of the amount remaining due on the 
  2.17  judgment.  
  2.18  STATE OF MINNESOTA                             DISTRICT COURT
  2.19  COUNTY OF ................       .......... JUDICIAL DISTRICT
  2.20  .............(Judgment Creditor) 
  2.21  .............(Judgment Debtor) 
  2.22  TO:  Debtor                                  EXEMPTION NOTICE 
  2.23     An order for attachment, garnishment summons, or levy of 
  2.24  execution (strike inapplicable language) has been served on 
  2.25  ............. (Bank or other financial institution where you 
  2.26  have an account.)  
  2.27     Your account balance is $........  
  2.28     The amount being held is $........  
  2.29     However, all or a portion of the funds in your account will 
  2.30  normally be exempt from creditors' claims if they are in one of 
  2.31  the following categories:  
  2.32     (1) relief based on need.  This includes:  Aid to Families 
  2.33  with Dependent Children (AFDC), AFDC-Emergency Assistance 
  2.34  (AFDC-EA), Medical Assistance (MA), General Assistance (GA), 
  2.35  General Assistance Medical Care (GAMC), Emergency General 
  2.36  Assistance (EGA), Work Readiness, Minnesota Supplemental Aid 
  3.1   (MSA), MSA Emergency Assistance (MSA-EA), Supplemental Security 
  3.2   Income (SSI), and Energy Assistance; 
  3.3      (2) Social Security benefits (Old Age, Survivors, or 
  3.4   Disability Insurance); 
  3.5      (3) reemployment insurance, workers' compensation, or 
  3.6   veterans' benefits; 
  3.7      (4) an accident, disability, or retirement pension or 
  3.8   annuity; 
  3.9      (5) life insurance proceeds, except that amounts in excess 
  3.10  of $20,000 are not exempt from a child support obligation; 
  3.11     (6) the earnings of your minor child and any child support 
  3.12  paid to you; or 
  3.13     (7) money from a claim for damage or destruction of exempt 
  3.14  property (such as household goods, farm tools, business 
  3.15  equipment, a mobile home, or a car).  
  3.16     The following funds are also exempt: 
  3.17     (8) all earnings of a person in category (1); 
  3.18     (9) all earnings of a person who has received relief based 
  3.19  on need, or who has been an inmate of a correctional 
  3.20  institution, within the last six months; 
  3.21     (10) 75 percent of every debtor's after tax earnings; and 
  3.22     (11) all of a judgment debtor's after tax earnings below 40 
  3.23  times the federal minimum wage. 
  3.24     TIME LIMIT ON EXEMPTIONS AFTER DEPOSIT IN BANK:  
  3.25     Categories (10) and (11):  20 days 
  3.26     Categories (8) and (9):  60 days 
  3.27     All others:  no time limit, as long as funds are traceable 
  3.28  to the exempt source.  (In tracing funds, the first-in, 
  3.29  first-out method is used.  This means money deposited first is 
  3.30  spent first.)  The money being sought by the judgment creditor 
  3.31  is being held in your account to give you a chance to claim an 
  3.32  exemption. 
  3.33     TO CLAIM AN EXEMPTION:  
  3.34     Fill out, sign, and mail or deliver one copy of the 
  3.35  attached exemption claim form to the institution which sent you 
  3.36  this notice and mail or deliver one copy to the judgment 
  4.1   creditor's attorney.  In the event that there is no attorney for 
  4.2   the judgment creditor, then the notice shall be sent directly to 
  4.3   the judgment creditor.  The address for the judgment creditor's 
  4.4   attorney or the judgment creditor is set forth below.  Both 
  4.5   copies must be mailed or delivered on the same day. 
  4.6      If the financial institution does not get the exemption 
  4.7   claim back from you within 14 days of the date they mailed or 
  4.8   gave it to you, they will be free to turn the money over to the 
  4.9   sheriff or the judgment creditor.  If you are going to claim an 
  4.10  exemption, do so as soon as possible, because your money may be 
  4.11  held until it is decided. 
  4.12     IF YOU CLAIM AN EXEMPTION:  
  4.13     (1) nonexempt money can be turned over to the judgment 
  4.14  creditor or sheriff; 
  4.15     (2) the financial institution will keep holding the money 
  4.16  claimed to be exempt; and 
  4.17     (3) seven days after receiving your exemption claim, the 
  4.18  financial institution will release the money to you unless 
  4.19  before then it receives an objection to your exemption claim.  
  4.20     IF THE JUDGMENT CREDITOR OBJECTS TO YOUR EXEMPTION CLAIM: 
  4.21     the institution will hold the money until a court decides 
  4.22  if your exemption claim is valid, BUT ONLY IF the institution 
  4.23  gets a copy of your court motion papers asserting the exemption 
  4.24  WITHIN TEN DAYS after the objection is mailed or given to you.  
  4.25  You may wish to consult an attorney at once if the creditor 
  4.26  objects to your exemption claim.  
  4.27     MOTION TO DETERMINE EXEMPTION:  
  4.28     At any time after your funds have been held, you may ask 
  4.29  for a court decision on the validity of your exemption claim by 
  4.30  filing a request for hearing which may be obtained at the office 
  4.31  of the court administrator of the above court. 
  4.32     PENALTIES:  
  4.33     If you claim an exemption in bad faith, or if the judgment 
  4.34  creditor wrongly objects to an exemption in bad faith, the court 
  4.35  may order the person who acted in bad faith to pay costs, actual 
  4.36  damages, attorney fees, and an additional amount of up to $100.  
  5.1                                 ............................. 
  5.2                                 ............................. 
  5.3                                 ............................. 
  5.4                                 ............................. 
  5.5                                 Name and address of (Attorney 
  5.6                                 for) Judgment Creditor
  5.7      EXEMPTION:  
  5.8      (a) Amount of exemption claim.  
  5.9      / / I claim ALL the funds being held are exempt.  
  5.10     / / I claim SOME of the funds being held are exempt.  
  5.11           The exempt amount is $............  
  5.12     (b) Basis for exemption.  
  5.13     Of the 11 categories listed above, I am in category number 
  5.14  ............  (If more than one category applies, you may fill 
  5.15  in as many as apply.)  The source of the exempt funds is the 
  5.16  following:  
  5.17  .............................................................
  5.18  .............................................................
  5.19  .............................................................
  5.20     (If the source is a type of relief based on need, list the 
  5.21  case number and county:  
  5.22     case number:  ...............; 
  5.23     county:  ....................) 
  5.24     I hereby authorize any agency that has distributed relief 
  5.25  to me or any correctional institution in which I was an inmate 
  5.26  to disclose to the above named creditor or its attorney only 
  5.27  whether or not I am or have been a recipient of relief based on 
  5.28  need or an inmate of a correctional institute within the last 
  5.29  six months.  
  5.30     I have mailed or delivered a copy of the exemption notice 
  5.31  to the judgment creditor or judgment creditor's attorney if 
  5.32  represented. 
  5.33                               .............................
  5.34                               DEBTOR
  5.35  DATED:  .............        .............................
  5.36                               .............................
  6.1                                .............................
  6.2                                DEBTOR ADDRESS 
  6.3      Sec. 3.  Minnesota Statutes 1996, section 550.37, 
  6.4   subdivision 10, is amended to read: 
  6.5      Subd. 10.  All money received by, or payable to, a 
  6.6   surviving spouse or child from insurance payable at the death of 
  6.7   a spouse, or parent, not exceeding $20,000.  The $20,000 
  6.8   exemption provided by this subdivision shall be increased by 
  6.9   $5,000 for each dependent of the surviving spouse or child, 
  6.10  except that this increase does not apply in a case of a child 
  6.11  support obligation.