This letter is to inform you of a recent change in the bankruptcy law that will have a substantial affect on the filing of Chapter 7 bankruptcy petitions. Just yesterday (September 8, 2005), the New York Law Journal reported that effective immediately, the New York State legislature has increased the NY State Homestead Exemption for a single person from $10,000 to $50,000.
The "Homestead Exemption" is the amount of equity that one can keep in a house, condominium or coop, if they file for Chapter 7 bankruptcy protection in New York State. This increase is of great benefit to people who appreciated real estate but desire to file for chapter 7 bankruptcy protection.
Due to the increase in the value of real estate over the past years, many people who wanted to file for Chapter 7 liquidation were unable to do so because they would lose the real estate that they owned and consequently had to file for Chapter 13 bankruptcy or do nothing.
However, due to the change of law, people who own appreciated real estate with $50,000 or less of equity can now do a Chapter 7 bankruptcy filing and will not have to worry about losing their co-op, condo, or town house. Equity is the difference between the fair market value of the property less the mortgage(s) which encumber the property.
Married debtors should now have a $100,000 homestead exemption.
Please note that any party who wishes to take advantage of the law change will need to file for Chapter 7 bankruptcy on or before October 17, 2005. Effective October 18, 2005 the new bankruptcy law takes effect which institutes a "means test" and as a result many individuals will not be able to file for chapter 7 bankruptcy protection due to their income level despite the increase in the homestead exemption.
If you have any questions regarding this strategy, please contact the undersigned.
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