What property am I permitted to keep?

 

In a Chapter 13 bankruptcy, the debtor retains all of his or her property. In a Chapter 7 bankruptcy, the law provides for what are called exemptions. These exemptions can be different in every state. In New York, some of the most commonly used exemptions include the following (this is not a complete list of all exemptions):

 

       ·   Household goods and furnishings and wearing apparel up to a total of $5,000 (depending on how much in cash and bank accounts is exempted).

 

• Cash, bank accounts and tax refunds not yet received, up to a total of $2,500 (not available if claiming homestead exemption)
• Homestead exemption up to $50,000 for debtor’s principal residence
• Burial plot
• One motor vehicle up to $2,400
• Security deposits for apartments and utilities
• Trusts; annuities; qualified retirement plans; Individual Retirement Accounts; life insurance policies

 

The exemption limits apply to your equity in the property, not the property’s total value. So, for example, if you own a car and are making loan payments on the car, you must know how much is still owed on the loan.  If the car is worth $10,000 and you owe $8,000, you have $2,000 in equity in the car and can exempt the car in your bankruptcy filing.

 

The exemption limits are not strictly construed. Most bankruptcy trustees will not administer assets of less than $2,000. For example, if you own a car that has $4,000 of equity, which is $1,600 above the exemption limit, the trustee will most likely not ask that the car be turned over.

 

If You Own a Home

Debtors get a $50,000 exemption for their principal residence (If married and filing a joint petition, it would be $100,000). However, because the value of homes has increased so dramatically, you may still have significant equity in your house over and above the exemption limit.  If that is the case, then you should be very cautious about filing a Chapter 7 bankruptcy. You could end up losing your home. A Chapter 7 debtor cannot have a case dismissed without the approval of the court. If you have a large amount of non-exempt equity in your home, the bankruptcy trustee will want to sell it to pay your creditors and will oppose any request to dismiss your case. You may want to consider filing under Chapter 13 instead, but you would have to pay back your debts up to the value of your non-exempt assets.

 

What Exemptions Apply

If you have moved to New York State within the past two years, the exemptions of the state that you moved from may apply. However, the specific exemptions that apply depend on how many different states you lived in during the preceding two and a half years, and the specific states that you lived in.  Certain states, such as Florida, do not permit non-residents to utilize their exemptions. In that case, the Federal bankruptcy exemptions would apply.  In some situations, you may benefit by being able to apply the Federal exemptions or out-of-state exemptions. The issue of what exemptions apply in a particular case can be complicated and is based on the facts of the case - please contact my office  to discuss your situation.