As of January 22, if you file for bankruptcy in New York you will have the benefit of higher NY bankruptcy exemptions, thanks to a new bill signed into law by Governor David Patterson just before the New Year.
What are some of the improvements?
- Home equity allowance increased from $50,000 to as high as $150,000 in the New York City area, Long Island, Westchester County and Putnam County.
- Home equity allowance increased $100,000 in the Hudson Valley
- Home equity allowance increased to $75,000 in upstate New York.
*This will enable many more New Yorkers to keep their homes in the event they need to file for bankruptcy. And since bankruptcy judges often allow the exemption for each filer, if a husband and wife both file in the New York City area, then they could together have a $300,000 home equity exemption.
Here are some additional improvements in NY bankruptcy exemptions thanks to the new law:
- Tools of the trade: Now $3,000 instead of $600
- Domestic animals: Now $1,000 instead of $450
- Jewelry and art can be exempted along with watches in an amount up to $1,000 (up from $35)
- Books: Now $500 instead of $50
- Motor vehicles: Now $4,000 instead of $2,400 (And $10,000 for a disabled-equipped car)
- “Wild card” exemption for personal property and cash (only applies if there’s no home exemption): Now $1,000
Additionally, New York debtors now have the option to choose between NY bankruptcy exemptions or the Federal exemptions. The Federal exemptions are generally less generous for homeowners. But if you do not have a home, the “wildcard” exemption is up to $10,825, which protects more cash, tax refunds and anything else within that limit.
At the same time, there are pitfalls to be aware of. Federal exemptions limit the cash value of life insurance to $11,000, whereas New York is unlimited.
The takeaway? It is important to sit down with an experienced bankruptcy lawyer to do a complete analysis before choosing your exemptions.
The purpose of exemptions, FYI, is to make sure that debtors are able to keep necessities so that they can continue living a productive economic life. If you take away everything or almost everything from a person, then they’re going to have a more difficult time getting back on their feet following their bankruptcy case. And it’s in our society’s interest to have people on their feet and able to contribute effectively to our economy.
So while the improved exemptions may seem to make sense from a humane point of view, it’s also about not creating a “debtor’s prison” existence for New York’s citizens.
If you have questions about new fair debt collection practices act exemptions and how to plan well for your bankruptcy, please, of course, feel free to get in touch for a free initial consultation.
