High credit scores don't protect you from debt stress. In Minnesota, where residents maintain the nation's highest average FICO credit score of around 742 (the highest in the US), many are still struggling with high-interest credit card debt (the average credit card debt is $7,380 (Q3 2025) per household), medical bills, and other financial obligations. If you're one of the 5.79 million (2024) Minnesotans facing debt that feels unmanageable—despite having good credit—this guide will show you proven solutions.

But not to worry! As a consumer, you have several effective debt relief options to support you. State laws will also help you to protect your properties from cunning creditors as much as possible.

True financial freedom comes from having a clear, actionable plan. The right strategy can eliminate your debts in 2-5 years. This guide walks you through each debt relief option step by step.

Advantages of choosing a popular debt relief company in Minnesota

• In the credit counselling option, a certified counsellor will review your finances, create a budget plan, and may suggest the best path to get out of debt for you.
• A professional debt relief company will negotiate with your creditors better than you, and may give you the best deal and perks (fee waiver or lowest interest rates).
• Every popular debt relief company is licensed under the Minnesota law (Minnesota Statutes Chapters 332A and 332B). So, legally, you are safe and protected by the state law.
• Professional companies will provide you with special services, like scheduled check-ins, customizable dashboards, and a dedicated contact point. This will keep you updated about your debt relief process and on track.
• Professionals will handle all the process work and creditor calls. No one will call you during work hours without your consent. So, you are protected from harassment through registered, compliant companies and can focus on your work and family.
• Remember, you must verify the license of the best relief company you choose in Minnesota. For that, you may visit the Minnesota Department of Commerce’s website and use the license lookup tool.

Who Qualifies for Debt Relief?

You should opt for a debt relief option in Minnesota if you're facing any of the following financial issues:

• You can't afford your minimum monthly payments, especially credit card debts, payday loans, or any other high-interest credit balances.
• You are carrying $10,000 or more in unsecured debts and are falling behind on your payments.
• You can afford to set aside $300–$800 per month toward your debt repayment fund.
• You have a good credit score and want to consolidate your debts into one easy monthly payment.
• You have lost your current job and are experiencing financial hardships.

Choose the debt relief option that fits your situation. You can select the debt consolidation option and consolidate your debts on your own. If you feel not so confident about this, you may choose a Debt Management Plan to regain control over your finances. You may also consider bankruptcy as your last resort if you cannot afford regular payments.

For example, If you can pay ≥70%, try settlement. If you can pay 100%, try consolidation...etc.

Minnesota Debt Relief Options

1. Debt Settlement

You can hire a debt settlement company to negotiate with your creditors and pay off the debt for less than what you owe. Usually, you have to pay a lump sum amount immediately to settle your debts entirely.

In this process, stop making payments to creditors. Next, the debt settlement company you hired will negotiate with your creditors and fix a settlement amount. You may need to pay a fixed amount each month to your settlement company to create a settlement fund. As the funds grow, the company will pay your creditors from that account, maybe within 2-4 years.

As you are settling your debts for less than what you owe, your creditors will report this to the credit bureaus. Your credit score will drop significantly. Your creditor will report settled accounts as 'paid settled.'

You also need to pay taxes on your saved amount through debt settlement. $600 or more saved by you will be considered as taxable income as per the IRS. This will be reported on Form 1099-C.

• Pros - You can save a lot from debt settlement in Minnesota. It also helps you to pay off your debts faster.
• Cons - Debt settlement could hurt your credit score severely. Also, your saved amount can be taxable.

Minnesota Laws That Protect You:

A debt settlement company must register itself under Minnesota law (Chapter 332B) to do business in Minnesota. A debt settlement company can't charge you any upfront fees before a debt is settled. It also requires a clear written contract and provides a 10-day period to cancel.

2. Debt Consolidation

You can consolidate all your existing debts and pay them off with a single monthly payment for a certain period. This way, you may reduce your overall interest rates, total interest payment amount, and remove the hassle of managing multiple debt balances every month.

You can take out a Fixed-Rate Consolidation Loan and pay off all the balances in a lump sum. Later, you may pay off this loan every month with an affordable payment. But remember, to get a low-interest loan, you must have a credit score of 660+ and a stable income, and it might take 2-5+ years to pay off.

If you have high-interest credit cards, consider a 0% balance-transfer card. Transfer your balances to this new card and pay them off within 12 to 18 months while you pay zero interest. During this period, you don't have to pay any interest. But to get this card, you must have a credit score of 700+ and have to pay a 3-5% transfer fee.

• Pros - You have one monthly payment to handle. It also lowers your overall interest rate and improves your credit score if you make regular, on-time payments. You can reduce monthly payments up to 50% and reduce interest rates up to 75%.
• Cons - You need a good credit score to get approved for a low annual percentage rate (APR) loan and 0% balance transfer card. For making regular monthly payments, you also need a stable income.

3. Credit Counseling and Debt Management

Nonprofit debt management plans are best if you're uncomfortable consolidating debt on your own. A certified counselor reviews your finances, creates a budget, and negotiates lower interest rates with your creditors.

You must check that the Nonprofit credit counselling agency has a license under Minnesota law (Chapter 332A). Credit counselling will include a $25 setup fee and a $40 monthly fee.

• Pros - You'll get expert advice from a certified credit counsellor. You'll get a structured and accountable repayment plan and can avoid multiple payments in a month.
• Cons - You need to be responsible for your monthly payment. It will take 24-48 months (if on a debt management plan or DMP) to get out of debt, so you need to be patient. A debt management plan can't help you with federal student loans or court judgments.

You should ask the necessary questions regarding fees and services to the counseling agency before signing up for a debt management program.

4. Bankruptcy - Your last option

When you can't pay off your debts by any means, you should consider the bankruptcy option. It will give you a fresh start to your financial life by removing most of your unsecured debts.

In Chapter 7 bankruptcy, you may have to sell off your assets to pay off your creditors. The process may take 3-6 months. This bankruptcy option discharges most of your unsecured debts like credit cards, payday loans, medical bills, etc.

In Chapter 13 bankruptcy option, you'll get a 3-5 year repayment plan to pay off your creditors. You may keep your assets and pay a portion of your debt based on your income. At the end of the plan, the remaining eligible debt may be discharged.

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Your credit score will recover to 700+ within 18-24 months after bankruptcy discharge. Remember that debt discharged in a bankruptcy is NOT taxable as income.

How Bankruptcy Protects Your Property in Minnesota (Exemptions)

• Statute of Limitations - In Minnesota, creditors generally have 6 years to sue you for a consumer debt. If they sue after this period, you can have the case dismissed by raising the statute of limitations as a defence. Importantly, Minnesota law prevents this clock from being "revived" by a new payment on an expired debt.
• Homestead Exemption - You have exemptions up to $510,000 in home equity (or $1,275,000 for agricultural use).
• Motor Vehicle Exemption - You have up to $10,000 in vehicle equity.
• Judgment Life - A civil judgment in Minnesota is valid for 10 years. Your creditor may try to collect the unpaid debt during this period.

Latest updates regarding Minnesota Consumer Protection

Medical Debt - Creditors can not report your medical debts in the major credit bureaus in Minnesota.

Wage Garnishment - You need to know these garnishment rules:

• If disposable income ≤ $445.20/week: 0% garnishment (100% protected)
• If disposable income $445.20–$670.80/week: 10% garnishment (90% protected)
• If disposable income $670.80–$896.40/week: 15% garnishment (85% protected)
• If disposable income > $896.40/week: 25% garnishment (75% protected)

As of April 2025, Minnesota uses income-based garnishment caps to protect lower-income workers.

Bankruptcy Costs - The filing fee for Chapter 7 is $338. Other costs may vary, so you should discuss them with a professional bankruptcy attorney in Minnesota.

Side-by-Side Debt Relief Options Chart

What should be your action plan to get debt relief in Minnesota?

1. You must understand your financial situation
   • Get your free credit reports by visiting AnnualCreditReport.com.
   • List all your debt balances, interest rates, and payment status.
   • Create a simple monthly budget to see where your money is going.
2. Know what rights you have in Minnesota
   • Medical debt can no longer appear on your credit report.
   • Wage garnishment is now capped at a lower percentage for many workers.
   • Creditors have only 6 years to sue you for most debts.
3. Choose a debt relief strategy
   • If you can pay the principal, you may choose DMP from a non-profit organization.
   • If you have good credit, get a low APR debt consolidation loan or a 0% balance transfer credit card.
   • If you can't pay your debt balances in full, choose the debt settlement option or discuss with a professional.
4. Know every detail of the company you want to hire
   • Check their business license from the MN Department of Commerce website.
   • The company must be accredited by the National Foundation for Credit Counseling (NFCC) for counselling.
   • Never pay upfront fees for debt settlement.
5. Ask your debt collector to stop harassing you
   • You should deliver a "cease communication" letter directly to your debt collector. As per the Fair Debt Collection Practices Act (FDCPA), they must stop every method of communication with you. So, no communication, no harassment!

Minnesota Debt Relief FAQs