One of the biggest misconceptions is that if you file for bankruptcy relief you will lose your house and all your other assets. This is absolutely not the case. In fact, most Chapter 7 cases filed in New York are “no asset” cases, meaning that all assets are protected and will not be taken by a bankruptcy trustee and sold for the benefit of your creditors. Chapter 13 cases work differently, but typically assets are protected there too.
When it comes to protecting assets in bankruptcy, the Bankruptcy Code provides for the protection of assets up to specific values or defers to state law on how to protect assets. The laws pertaining to protecting assets are called “exemption statues.” In some states you must use state exemptions and in others you must use federal exemptions. New York is among the states that allow you to choose state or federal exemptions.
New York State exemptions are more favorable if you own your primary residence and it has a significant amount of equity (value above the balance on all mortgages) while federal exemptions are more favorable if you do not own real estate or have little equity in your primary residence. In a bankruptcy petition, we must choose which set of exemptions we will use. We cannot jump between state and federal exemptions depending on the property we are trying to protect.
This table outlines some of the more common exemptions used:
New York State | Federal | |
| Homestead (primary residence only) | $170,825 in the Five Boroughs, Nassau, Suffolk, Rockland, Westchester, and Putnam Counties; $142,350 in Orange, Albany, Dutchess, Columbia, Saratoga, and Ulster Counties; $85,400 all other counties | $25,150 |
| Vehicle (1 per debtor) | $4,550 ($11,375 if equipped for use by disabled debtor) | $4000 |
| Wildcard (if you don’t take homestead exemption) | $1,150 | $1,325 + up to $12,575 of unused homestead ($13,900 maximum wildcard) |
| Cash (if no homestead) | $5,700 | N/A; see wildcard |
| 401k/403b/Pension | 100% | 100% |
| IRA | 100% | $1,362,800 |
| Jewelry | $1,150 | $1,700 |
| Household Goods and clothing | $11,375 | $625 per item, $13,400 total |
| Personal Injury | $8,550 | $25,150 |
| Life Insurance | Not exempt | $13,400 |
| Tools of the Trade | $3,400 | $2,525 |
What about Chapter 13 cases?
Chapter 13 cases are a little different. We still choose a set of exemptions to protect assets. However, if there are assets that cannot be protected, a trustee will not take and sell them. Your unprotected assets will still be safe as long as you create a plan that pays the greater of the following:
- Your disposable income based on a budget analysis (Schedules I and J of a bankruptcy petition);
- Your disposable income based on the “means test”; or
- You simply must create a repayment plan that pays your creditors the value of the unprotected assets.
Before considering filing for bankruptcy relief, consult with a skilled and knowledgeable attorney who will review your assets and create a plan to protect your assets. While you may not be able to protect that mansion with no mortgage or the paid off Bentley, most New Yorkers can go through a bankruptcy and keep their assets. I always tell my clients that even if they have to surrender $4,000 in the bank or an upcoming tax refund (more on that in a later post!) to eliminate $80,000 of credit card debt and personal loans, they got a very good deal.
Matthew D. Zimmelman has helped thousands of New Yorkers eliminate their debt with successful planning to protect their assets. For more on how you can eliminate your debt while retaining your assets, give us a call or send us an email.
Zimmelman Law PLLC
Latest posts by Zimmelman Law PLLC (see all)
- New York State Foreclosures To Quickly Proceed After NY Court Of Appeals Ruling - February 17, 2023
