Friday, August 27, 2010

New New York bankruptcy exemptions

Here at Shenwick & Associates, one of the questions we're most frequently asked is "what will I be able to keep after for filing for Chapter 7 or Chapter 13 bankruptcy?" When a bankruptcy petition is filed, a bankruptcy estate is created for the benefit of the debtor's creditors, which consists of all of the Debtor's property except for what state or federal law allows to be exempted. Often, there are no assets left over for distribution to creditors after property is exempted, and the case becomes a "no asset" case.

What property a Debtor may keep in bankruptcy depends on which state the Debtor is filing for bankruptcy from. Every state has their own laws about what can be exempted from the bankruptcy estate, and some states allow a Debtor to choose whether to exempt property under state laws or the federal exemptions contained in § 522(d) of the Bankruptcy Code.

Under current New York law, Debtors may only use the New York State exemptions, which aside from increasing certain exemptions (such as the homestead exemption), have not been substantively revised and updated in many years.

However, New York bankruptcy exemptions are about to undergo their biggest transformation in years. New York State Senate bill S. 7034A and Assembly bill A. 8735A have been passed by the Legislature and are expected to be signed into law by Governor Paterson in the very near future.

The scope of the bill is very broad, but a few of the major changes are:

• The homestead exemption would increase from $50,000 to: $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state.

• The motor vehicle exemption would increase from $2,400 to $4,000. If the vehicle was equipped for a disabled person, the limit would be $10,000.

• The aggregate individual bankruptcy exemption for cash, household goods and clothing would increase from $5,000 to $10,000.

• The New York Banking Department will publish cost of living adjustments to exemption amounts every three years commencing April 1, 2012.

Debtors will now be able to choose whether to use the New York exemptions or the federal exemptions. This will be especially useful for Debtors who do not own a home, since the "wildcard" exemption in § 522(d)(5) of the Bankruptcy Code allows Debtors to exempt a significant amount of cash.

A married couple filing jointly for bankruptcy can double the amount of the exemptions listed above.

To find how to make the best choices to protect your precious property in bankruptcy, please contact Jim Shenwick.

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