The State of New York has allowed residents to use the federal bankruptcy exemptions. However, the New York Bankruptcy Code has implemented rules requiring prospective files to choose state or federal exemptions.
This means that a prospective filer of bankruptcy cannot use both exemptions at the same time. In addition, a prospective New York bankruptcy filer has to have resided in the State of New York for at least two years in order to use the New York exemptions.
Common examples of New York bankruptcy exemptions are outlined below. It is important to note that the exemption amount listed for the exemptions may be doubled for married couples filing jointly.
An individual may be considering filing bankruptcy in the State of New York. If so, it is important to consult with a local New York attorney who is familiar with the bankruptcy exemptions to ensure that they fall within the limit of the exemption.
New York exemptions include:
- Homestead exemption: The homestead exemption, which includes equity in a dwelling that is used as a residence in New York, is determined by age, marriage status, and the region in which the individual resides and is filing;
- New York allows up to $165,550 for the following NYC counties:
- Suffolk;
- Nassau;
- Putnam;
- Rockland;
- Kings;
- New York;
- Bronx;
- Richmond; and
- Westchester;
- New York allows up to $131,325 for the following counties:
- Albany;
- Columbia;
- Dutchess;
- Orange;
- Saratoga; and
- Ulster; and
- New York allows up to $82,775 for all counties not listed;
- Equity in automobiles:
- Up to $4,825 in value, or up to $11,975 if a disabled debtor owns the vehicle;
- Personal property:
- Up to $1,175 in personal property;
- Up to $6,000 in cash;
- Any burial plots;
- Up to $1,175 in jewelry;
- Tools of the trade:
- Up to $3,575 in implements, books, and other tools of the trade;
- Pensions:
- Up to $1,245,475 in Roth IRAs or IRAs;
- Unlimited ERISA-qualified benefits that are needed for support;
- Unlimited 401(k), 403(b), profit-sharing plans, or other tax-exempt accounts;
- Unlimited private pensions;
- Public benefits:
- Alimony and child support:
- Any amount that is reasonably necessary for the support of the debtor and their dependents; and
- Wildcard exemption:
- The wildcard bankruptcy exemption in New York is $1175.
What Is Bankruptcy?
Bankruptcy is a legal process that an individual or business initiates when they are not able to meet their financial obligations. Using bankruptcy, a debtor can liquidate their assets or restructure their finances to eliminate or fund debts they are not able to pay.
There are numerous different types of bankruptcy, and all of them are defined and governed by federal laws. Consumer bankruptcy is used when an individual who cannot pay the debts they incurred for personal needs initiates bankruptcy proceedings.
Once consumer bankruptcy proceedings are finished, the debtor who filed for bankruptcy will no longer be liable for their debts, except for certain debts that are not dischargeable under bankruptcy laws.
In addition, after consumer bankruptcy proceedings, a court enters an official discharge order releasing the debtor from their debts. This order provides the debtor with a clean financial state.
However, it is important to note that the bankruptcy remains on the debtor’s credit report for up to ten years. In addition, filing for bankruptcy may have other lasting consequences on the debtor.
Bankruptcy proceedings should only be used as a last resort for times of extreme financial hardship.
What Are the Different Types of Bankruptcy?
As discussed above, there are numerous different types of bankruptcy. The three main categories of bankruptcy used in the United States are Chapter 7, 11, and 13.
Chapter 7
Chapter 7 Bankruptcy, also called liquidation bankruptcy, allows an individual to legally discharge all of their debts. There are, however, specific rules that govern who can qualify and initiate Chapter 7 bankruptcy proceedings.
In order to be eligible to file for Chapter 7 bankruptcy, the debtor’s income has to be equal to or below the median income in their state. Every state has different income requirements for filing Chapter 7 bankruptcy.
If a debtor’s income exceeds the requirement for their state, the court may apply a means test that is based on their previous six months of income. However, this is not guaranteed.
In the State of New York, the median income for filing Chapter 7 bankruptcy as of July 2022 was as follows:
- 1-person family: $63,715;
- 2-person family: $78,663;
- 3-person family: $95,779; and
- 4-person family: $116,818.
If a family includes over 4 individuals, the New York Bankruptcy Code provides that $9,900 per individual be added to the highest median income for a family of 4 individuals. This means that a family of five would be $126,718, a family of six would be $136,618, and so on.
If an individual is eligible and initiates a Chapter 7 bankruptcy, the court will issue an automatic stay. This order prevents creditors from attempting to collect on the debts that the filer owes.
An automatic stay also serves to pause or prevent the following actions against the bankruptcy filer:
- Pending lawsuits against the debtor;
- Wage garnishments of the debtor;
- Filing of liens against the debtor; or
- Seizure of the debtor’s property.
Chapter 13
Chapter 13 Bankruptcy, which is also called wage earner’s bankruptcy, is a way for a debtor to restructure their debts to affordable payments. Chapter 13 bankruptcy is typically reserved for individuals who have higher incomes than their state median but may also be used by individuals who want to keep their property intact.
With a Chapter 13 bankruptcy, certain debts may be eligible for discharge, while others may require full payment using a payment plan. It is common for payment plans to range between three and five years.
Individuals are usually considered eligible for filing Chapter 13 bankruptcy if they meet the following requirements:
- They are either an individual or a married couple;
- As of April 2022, their total secured debts are equal to or less than $1,395,875.00;
- As of April 2022, the filer’s total secured debts are equal to or below $465,275;
- The filer has not had a bankruptcy petition dismissed within the last 180 days based on a failure to appear or a failure to comply with the bankruptcy court; and
- The filer receives credit counseling using an approved counselor within 180 days of filing their bankruptcy petition.
Chapter 13 bankruptcy is different from Chapter 7 because, with a Chapter 13, the borrower keeps their property and continues to make payments on their debts. Similar to a Chapter 7, a Chapter 13 bankruptcy can affect a filer’s credit for up to ten years after they file.
During the Chapter 13 bankruptcy process, the debtor is required to adhere to a strict budget without any lines of credit. Because of this, there are many debtors that drop out of the payment plan.
Chapter 11
The last common type of bankruptcy is a Chapter 11 bankruptcy, also called a reorganization bankruptcy. This type of bankruptcy is available to individuals, partnerships, and corporations.
Unlike other categories of bankruptcy, a Chapter 11 bankruptcy does not have any limits on the number of debts that are involved. Because of this, Chapter 11 bankruptcy is the most common choice for a large business that is seeking to restructure its debts in order to become profitable again.
In addition, a Chapter 11 bankruptcy is typically more expensive to the debtor than the other chapters. It is important to note that the rate of successful business reorganizations is generally very low.
Do I Need a Lawyer for Help With New York Bankruptcy Exemptions?
You might be considering filing for bankruptcy in the State of New York and the bankruptcy exemptions that may be available to you. If this is the case, you should consult with a New York bankruptcy lawyer. Your lawyer will guide you through the bankruptcy process to help ensure you are provided the best possible outcome.
Your attorney will help you file the necessary paperwork, ensure it is complete and properly filed, and will represent you any time you have to appear in bankruptcy court. Having an attorney represent you will help ensure that your case is not dismissed based on a technical issue or mistake.
