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Initial creditor procedure and remedies in Minnesota

The initial steps regarding creditor remedies in Minnesota is dependent on the amount of the debt. If the debt is under $7,500, the creditor should generally bring a claim in conciliation court, as the filing fee is only $55 to $60 (depending on the county) while the filing fee in district court is $250.

Once the claim is submitted to the conciliation court, the court will set a hearing date and mail the notice of hearing and the claim to the debtor if the debt is under $2,500. If the letter does not come back to the court, service is deemed to have been accomplished. If the claim is for more than $2,500, the creditor must serve the debtor personally or via certified mail. We have found that personal service is more reliable in that hardened debtors often fail to pick up certified mail at the post office.

Usually, debtors do not appear at the conciliation court hearing whereupon the judge will issue a default judgment as long as evidence is produced verifying the debt and that service was accomplished (if over $2,500). After a judgment is issued, the debtor is allowed about twenty days to appeal to district court. If the debtor does not appeal, the creditor can then docket the judgment in district court by filing an affidavit of identification and a fee (usually $30, depending on the county). Once docketed, the creditor is then free to attempt collection (see below).

However, if the debtor owes more than $7,500, the creditor will be precluded from pursuing its claims in conciliation court (unless the creditor is willing to reduce its claim) and must then serve a summons and complaint on the debtor personally. Once service is accomplished, the debtor has twenty days to provide an answer. Usually, the debtor is mute whereupon the creditor is free to apply to the court for an administrative default judgment by submitting a $250 check, an affidavit in support of entry of default judgment, an affidavit of identification, the original affidavit of service, and the original summons and complaint. In most counties, the administrative default judgment is then granted within a matter of days and the creditor is then free to pursue collection after thirty days from the docketing of the judgment.

If the creditor is aware of jobs that the debtor holds and knows their place of employment, the creditor should then send a Garnishment Exemption Notice and Notice of Intent to Garnish Earnings to the debtor. Unfortunately, state law does not allow garnishment of a debtor’s wages if the debtor is a recipient of public aid such as medical assistance, energy assistance, etc. Thus, if the debtor mails back the exemption notice claiming public aid, the debtor’s wages cannot be garnished unless the debtor’s claims of public assistance prove false.

If garnishment of wages is not an option or if the creditor does not know where the debtor works, the creditor will then have to request from the Court an Order for Disclosure. The procedure for obtaining such an order differs depending on the county. For instance, in Hennepin County, a Request for Order for Disclosure must be filed along with three copies of the Orders for Disclosure and the filing fee. However, in Dakota County, the creditor need only submit a Request for Order for Disclosure and the filing fee ($10), whereupon the court will send an Order for Disclosure to the debtor requiring that he reveal his assets within ten days or risk a fine, jail, or both. If the debtor fails to comply, the creditor may bring a motion for contempt of court.

Finally, creditors must always keep the Fair Debt Collection Practice Act (FDCPA) in mind, especially if a third party is collecting on the debt as the creditor’s representative. The particular requirements of the FDCPA are beyond the scope of this article, but it is worth noting that severe penalties may be imposed against a creditor that violates the FDCPA. If your business has a debt for which you wish to seek collection, attorneys at our office welcome the opportunity to assist you.