Filing for Chapter 7 bankruptcy in New York can provide much-needed debt relief, but it’s crucial to understand what assets you may have to give up in the process. This guide will explore the intricacies of Chapter 7 bankruptcy in New York, focusing on what you might lose and what you can potentially keep.
New York Bankruptcy Exemptions
New York allows bankruptcy filers to choose between state and federal exemptions. This choice can significantly impact what you get to keep when filing for Chapter 7 bankruptcy. Let’s explore the key exemptions under New York state law:
Homestead Exemption
The homestead exemption can be used to protect some or all of your equity in your primary residence, whether it’s a house, condominium, co-op, or mobile home. New York’s homestead exemption is particularly generous compared to that of many other states. The amount you can exempt varies based on the county where you reside:
- $179,975 for the counties of Bronx, Kings, Nassau, New York, Putnam, Queens, Richmond, Rockland, Suffolk, and Westchester
- $149.975 for the counties of Albany, Columbia, Dutchess, Orange, Saratoga, and Ulster
- $89,975 for all other counties in New York.
Motor Vehicle Exemption
Under New York law, you can exempt up to $4,825 in equity in one motor vehicle. If the vehicle is equipped for use by a disabled person, this exemption increases to $11,975.
Personal Property Exemptions
New York provides various exemptions for personal property, including:
- Any necessary clothing, household furniture, a refrigerator, TV set, radio, computer, cell phone, and kitchenware
- Up to $3,575 in professional tools, books, and instruments
- Up to $1,175 in jewelry
- Up to $1,175 in domestic animals and food for those animals for 120 days.
Wildcard Exemption
New York offers a wildcard exemption of $1,150 that can be applied to any of your property, as long as you don’t declare any homestead exemption..
Retirement Accounts and Pensions
Most retirement accounts and pensions are fully exempt under New York law. This includes:
- IRAs and Roth IRAs
- 401(k)s
- Pensions
- Profit-sharing plans.
Insurance Policies and Others
- Life insurance: Proceeds and annuity contract benefits are generally exempt under New York law.
- Disability insurance benefits: All money received from disability insurance is generally exempt.
- Social Security payments: You can retain all Social Security benefits you receive.
- Security deposits: Any money you’ve paid as a security deposit, such as for apartment rent or utilities, is usually protected.
- Public assistance funds: All public assistance benefits you receive are typically exempt.
- Life insurance proceeds: Benefits received from life insurance policies are generally protected.
- Unemployment insurance: You may typically keep any unemployment insurance benefits you receive.
- Veteran benefits: All veteran benefits are typically exempt from bankruptcy proceedings.
- Armed forces wages: Any income earned from serving in the United States armed forces is generally protected.
- Workers’ compensation: Benefits received from workers’ compensation are usually exempt.
- Spendthrift trust funds: If someone else established a spendthrift trust for your benefit, the funds in this trust are typically protected.
What You Might Lose in Chapter 7 Bankruptcy
While New York’s exemptions are generous, there are still assets you might have to surrender when filing for Chapter 7 bankruptcy:
Non-Exempt Equity in Your Home
If your home equity exceeds the homestead exemption amount, you may be at risk of losing your home. The trustee could sell your home, pay off your mortgage, give you the exempt amount, and use the rest to pay creditors.
Non-Exempt Vehicles
If you have a vehicle with equity exceeding the motor vehicle exemption, the trustee may sell it to pay creditors. However, you might be able to use the wildcard exemption to protect additional equity.
Luxury Items
Expensive jewelry, art collections, antiques, and other valuable possessions that exceed the personal property exemptions may be sold by the trustee.
Second Homes or Vacation Properties
The homestead exemption only applies to your primary residence. Any additional real estate properties you own may be liquidated.
Non-Exempt Cash and Investments
Bank accounts, stocks, bonds, and other investments that aren’t protected by exemptions may be used to pay creditors.
Business Assets
If you own a business, its assets may be at risk in a Chapter 7 bankruptcy. However, the “tools of the trade” exemptions may protect some business-related property.
Strategies to Protect Your Assets
While Chapter 7 bankruptcy can result in the loss of some assets, there are strategies you can employ to protect your property:
Choose the Right Exemption Scheme
Carefully compare New York’s state exemptions with federal exemptions to determine which set will protect more of your assets.
Consider Chapter 13 Bankruptcy
A preferable choice would be Chapter 13 bankruptcy if you have a sizable amount of non-exempt assets. It allows you to keep your property while repaying debts through a three- to five-year repayment plan.
Timing Your Bankruptcy Filing
In some cases, waiting to file bankruptcy can help you maximize your exemptions. For example, if you’re close to paying off a car loan, it may be beneficial to file sooner rather than later so the existence of the larger car lien means you have less non-exempt equity.
Convert Non-Exempt Assets
In some cases, it may be possible to convert non-exempt assets into exempt ones before filing. However, this must be done carefully and honestly to avoid accusations of fraud.
The Impact on Your Financial Future
While losing assets in Chapter 7 bankruptcy can be challenging, it’s important to consider the long-term benefits:
Debt Relief
Chapter 7 bankruptcy can eliminate most unsecured debts, providing significant financial relief.
Fresh Start
By eliminating overwhelming debt, Chapter 7 bankruptcy can give you a fresh financial start.
Credit Recovery
While bankruptcy initially impacts your credit score, many filers find that their credit begins to improve within a year or two after filing.
Overall, filing for Chapter 7 bankruptcy in New York is a significant decision that requires careful consideration of what assets, if any, you might lose and what you can keep. While New York’s generous exemptions allow many filers to keep most or all of their property, it’s crucial to understand the potential risks and strategize accordingly.
Protect Your Property in Chapter 7 Bankruptcy. Consult New York Bankruptcy Attorney John D’Amato.
If you’re considering Chapter 7 bankruptcy in New York, it’s advisable to consult with an experienced bankruptcy attorney. You’ll want to strategize with your lawyer on how you can best safeguard your assets while working towards debt forgiveness through bankruptcy.
Attorney John D’Amato has successfully handled New York bankruptcy cases for 30 years. When you work with us at the D’Amato firm, we’ll help you navigate the complex bankruptcy law, maximize your exemptions, and pursue the best possible outcome for your financial future. Contact us at (716) 703-9099 for a free and confidential consultation.