If you own real estate, expensive personal property or valuable assets, you should carefully consider what might happen to these items during your bankruptcy. Traditionally, more than 90 percent of Chapter 7 filers have no-asset cases. If you’re filing for bankruptcy in New York, here are a few things that you should know about exempt and nonexempt property before your proceed.
What Is Chapter 7 Bankruptcy?
Chapter 7 is also called a liquidation or straight bankruptcy. This process is intended for individuals and families who don’t have enough disposable income to repay their debts. That’s why many people who qualify for Chapter 7 protection don’t have any nonexempt property. Other times, the bankruptcy trustee who’s in charge of selling your property and distributing the proceeds might decide that it’s not worth liquidating a few valuable items. In a no-asset case, you can keep your possessions. The process is easier, and your debts will be discharged faster. If you own real estate or substantial assets, you might have bigger questions and concerns.
What Property Can I Keep After Chapter 7 Bankruptcy?
Federal and state bankruptcy laws include long, detailed lists of exempt and nonexempt property. You keep the exempt property, but the nonexempt items can be liquidated. Luxury possessions, such as yachts, pricey artwork and high-end sports cars fall into the nonexempt category. With other assets, such as retirement accounts and home equity, different rules apply. Consider the following exemption guidelines before filing for bankruptcy in New York.
- Up to $600 in cash or bank accounts
- Essential household items, such as clothing, furniture, home goods and appliances
- A vehicle worth up to $4,425 more than the remaining value on any loan
- Jewelry, watches and art with a combined maximum value of $1,350
- Equipment needed for your profession with a combined value up to $3,300
- Pensions, annuities and most retirement accounts
- Social Security, unemployment, workers’ compensation, disability and other benefits
- Alimony, child support and court-ordered payments that are owed to you
Are There Different State and Federal Bankruptcy Exemptions?
In New York, you can choose between state or federal limits, but you can’t mix and match. Each option may have advantages that a Long Island bankruptcy lawyer can explain. Here’s an example. In New York, recoveries from personal injury lawsuits are exempt up to $8,275. Federal bankruptcy laws have a generous limit of $22,000, excluding punitive damages.
Can I Keep Any Other Property During My Bankruptcy?
There’s a wildcard option that lets you retain a certain amount of personal property or a combination of cash, equity and sentimental items. The federal limit is $1,250, and the state limit is $1,100. Different rules apply if you are using a homestead exemption to keep your house unless part of the wildcard’s value remains. If you and your spouse are filing for bankruptcy jointly, you may both be entitled to a wildcard that protects your individually owned property.
Does New York State Have Rules for Keeping My Home in Bankruptcy?
New York does have a homestead exemption that lets you keep a portion of your equity. These limits are adjusted periodically. The maximum homestead exemption for your primary residence is $165,550 if you live in Kings, Queens, Nassau or Suffolk counties. Lower limits apply outside Long Island and the metropolitan area. The homestead exemption is a valuable tool for homeowners who are current on their mortgage payments and have equity to protect. The federal homestead limit is $11,850. Anyone who doesn’t have home equity can use this allowance to protect personal property during a federal bankruptcy.
Are There Any Other Strategies for Keeping My Home in Bankruptcy?
If your equity exceeds the homestead limit, the trustee can liquidate your house. In this case, Chapter 13 bankruptcy might be a better option because you will be able to keep your home and your other property. You’ll also have the option to make catch-up payments on your mortgage if they are needed. This process is more challenging with Chapter 7 bankruptcy.
Bankruptcy laws are complex. Many different limits apply depending on your situation and the type of assets that you own. It’s wise to consult a Long Island bankruptcy lawyer who can review your income and assets to determine the best course of action for you and your family.
Blutter & Blutter are bankruptcy attorneys located here on Long Island with significant experience representing individuals in Queens County as well as Nassau County, New York and Suffolk County, New York.