Navigating New York Bankruptcy Exemptions: A Guide
Facing a lawsuit or the potential loss of your home can be incredibly stressful. Many people in this situation worry about losing everything they own. Bankruptcy is often seen as giving people the help they need by lessening their debt, not taking everything away. This is where New York bankruptcy exemptions come into play, offering a lifeline to those struggling with debt.
Bankruptcy exemptions let filers keep property needed to maintain a home and job. If you’re considering bankruptcy in New York, understanding how exemptions work is very important. The system is setup so that creditors get paid.
Let’s walk through what you need to know about New York bankruptcy exemptions.
Understanding New York Bankruptcy Exemptions
Bankruptcy exemptions are laws that protect your property in a bankruptcy case. They allow you to keep certain assets, so you’re not left with nothing. The goal is for filers to keep property but not luxury items.
These exemptions determine what property you can keep. Creditors might try to seize your assets, but with bankruptcy exemptions and a skilled bankruptcy attorney, they receive their funds with exemptions applied.
New York offers you a choice to use their state exemptions, federal non-bankruptcy exemptions, or the standard federal bankruptcy exemptions.
Choosing Between State and Federal Exemptions
New York lets filers choose between the New York state exemptions and the federal bankruptcy exemptions. You cannot mix and match, so pick the set that best protects your property.
This flexibility can be really helpful. For instance, the federal homestead exemption might be better if you have less home equity.
Many times married filers can double this exemption amount when they file jointly and also own the property. A bankruptcy filing in New York can give you options with asset protection.
Key New York State Exemptions
New York’s exemption laws cover a wide variety of properties. This gives the bankrupt individual more leverage. Here are some of the most critical categories:
Homestead Exemption
The homestead exemption is key because of course this protects the equity you have in your home. It’s designed to help make sure you don’t lose the roof over your head because of your debts.
If you use the homestead exemption, you’ll be much better off.
In New York, the amount you can protect varies by county:
- $204,825 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties.
- $170,700 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties.
- $102,400 in all other counties.
These amounts give homeowners considerable protection. Keep in mind these values are based on the equity in your home, which is the market value minus what you owe on mortgages and liens.
Motor Vehicle Exemption
In New York, you can protect up to $5,500 in equity in a motor vehicle. If your vehicle is equipped for use by a disabled debtor, that amount increases to $13,625.
This exemption recognizes how vital transportation is. People must get to work, take their children to school and get food or groceries.
Wildcard Exemption
New York’s wildcard exemption lets you protect any personal property (but not real estate). If you’re not claiming the homestead exemption, this exemption offers you added flexibility.
You can protect up to $1,325 worth of any personal property or cash. The wildcard exemption covers assets that other exemptions don’t specifically address.
Pension and Retirement Benefits
Most tax-exempt pensions and retirement accounts are fully protected under federal law, regardless of whether you choose New York or federal exemptions. These protected accounts include 401(k)s, 403(b)s, profit-sharing and money purchase plans, and SEP and SIMPLE IRAs.
Traditional and Roth IRAs are protected up to $1,512,350 per person. Additionally, New York law specifically exempts IRA, 401(k), Keogh, and other qualified retirement plans.
Other Notable Exemptions
New York law gives protections beyond the major categories, also. These include:
- Household goods: Furniture, clothing, and other household items.
- Tools of the trade: Up to $3,300 worth of tools and equipment to perform their jobs.
- Certain life insurance proceeds and annuity contracts.
Federal Bankruptcy Exemptions in New York
Instead of New York’s state exemptions, you can choose to use the federal bankruptcy exemptions. Let’s talk about which is a better choice for people.
It really depends on a individual case, here’s a look at some of the key federal exemptions.
Federal Homestead Exemption
Under the federal exemptions, you can protect up to $27,900 of equity in your home. Remember, you can only protect a rental or an investment property if it is also your main place to live.
Federal Personal Property Exemptions
The federal exemptions provide several personal property protections:
- $4,450 for your motor vehicle.
- $1,875 for jewelry.
- $700 per item up to $14,875 in total for household goods, furnishings, appliances, clothes, books, animals, crops, and musical instruments.
- $2,800 for tools of the trade.
- $14,875 in loan value, accrued dividends, or a life insurance policy interest.
Federal Wildcard Exemption
The federal wildcard exemption lets you protect $1,475 of any property. Additionally, you can use up to $13,950 of any unused portion of your homestead exemption on other assets.
Federal Domestic Support and Public Benefits
Some items have full federal protection, making it so an individual gets their financial life in order. These are:
- Spousal or child support needed for your support.
- Social Security benefits, unemployment, veteran’s benefits, public assistance, and disability/illness benefits.
- Life insurance payments required for your support.
Federal Personal Injury Recoveries
You may protect certain recoveries. These are:
- $27,900 for personal injury, excluding pain and suffering or monetary loss.
- Any recovery for the wrongful death of someone you relied on for support.
- Compensation received because you were a crime victim.
Comparing Chapter 7 and Chapter 13 Bankruptcy
The type of bankruptcy you file has implications for how your nonexempt property is handled. Depending on how you use it will dictate outcomes in these cases.
Chapter 7 is used by people who can’t repay their debts. Chapter 13 lets people repay their debt in a five year plan that they propose to creditors and the courts.
You will want to know what those main differences are, which we have listed below:
What Happens to Nonexempt Property?
In Chapter 7 bankruptcy, the trustee can sell any nonexempt property to pay back creditors. Chapter 13 bankruptcy will take five-years.
With the longer filing, you have more opportunities to keep assets.
It’s easy to make a mistake here. Even something like incorrectly categorizing an asset can cause the bankruptcy trustee to dispute the categorization of an item and can delay or risk the bankruptcy.
How New York Bankruptcy Exemptions Work
Understanding bankruptcy laws requires thorough knowledge. For example, you can file for bankruptcy in New York after living there for more than 180 days.
To use New York exemptions, you must reside there for 730 days. Or else you can use the previous states bankruptcy exemptions.
Let’s analyze New York in this table:
| Property Type | Exemption Amount | Notes |
|---|---|---|
| Homestead | $102,400 to $204,825 (by county) | Protects home equity. Amount based on county of residence. |
| Motor Vehicle | $5,500 ($13,625 if modified for disability) | Protects the value of one vehicle |
| Wildcard | $1,325 | For property of any value, unless homestead exemption is used. |
| Pension/Retirement | Up to $1,512,350 for IRA and Roth IRAs; fully exempt for qualified plans | Applies to qualified accounts, which are protected under federal and state law. |
New York adjusts exemption amounts periodically. You can find current numbers by looking into your areas local city court offices and county bankruptcy resources.
Seek Advice If You Have Questions
Navigating bankruptcy can be challenging. If you need help, please feel free to reach out to my office to review options that would suit you. I’ve guided clients through every possible debt hurdle. Many cases were quite intricate, but we made it through, and you can, too!
Conclusion
Understanding New York bankruptcy exemptions is a key element of good sound financial planning. Whether you’re weighing the differences between state and federal guidelines, making a sound decision comes from knowledge.
By making informed choices, you put yourself on the right path. That path can help you on the road to recovery and sustainability. Request your free consultation today by getting in touch with The Law Office of William Waldner at 212-244-2882.