One of the quirks of bankruptcy law is that it defers to state governments on a crucial issue: exemptions. People filing New York bankruptcy might be able to keep more of their homes’ values or wages out of the bankruptcy estate (and away from the trustee and creditors) than debtors filing elsewhere. In early October, the National Consumer Law Center (NCLC) published a paper titled, “No Fresh Start: How States Let Debt Collectors Push Families Into Poverty” (PDF), which compared all the states’ exemptions. It determined that New York’s exemptions are better than most states’. Here are the grades it received.
- Protection of wages (“B”): New York’s bankruptcy exemptions keep 90 percent of debtors’ wages earned over the last 60 days or 30 times the state or federal minimum wage ($7.25 per hour) out of the bankruptcy estate. The NCLC recommends 80 times the state or federal minimum wage or 10 to 15 percent of disposable income.
- Protection of cars (“D”): In New York, debtors can only claim a $4,000 exemption for their motor vehicles, $10,000 if they are disabled. States receiving an “A” grade protected $7,000 of automobile value.
- Protection of Homes (“C”): New York’s homestead exemption depends on what county debtors live in. Residents of New York City’s five boroughs, as well as Nassau, Suffolk, Rockland, Westchester, and Putnam counties receive a $150,000 exemption. For residents of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties receive a $125,000 homestead exemption. Everywhere else in the state it’s $75,000. The NCLC recommends an exemption of the median national house price (~$211,000). As an editorial, this particular grade isn’t completely fair given that most of New York’s population lives in counties with higher homestead exemptions. A “B” is probably warranted.
- Protection of Necessary Household Goods (“A”): In New York, the state’s exemptions cover all household furniture, a stove, refrigerator, and certain other items. While not exactly the “all necessary household goods” that other states protect, it’s still enough to justify the “A”.
- Protection of family bank accounts (“A”): The NCLC bases its grades from the perspective of a debtor family paying $700 in rent with another $500 leftover for other expenses ($1,200 total). New York’s family bank account exemption keeps $1,740 out of the bankruptcy estate as well as a $1,000 exemption in lieu of a homestead exemption.
Despite the poor grade for the motor vehicle exemption, the NCLC classified New York as one of the “best” states in terms of exemptions. In all likelihood, the low score for the motor vehicle exemption isn’t stinginess on the legislature’s part but neglect for failing to link the exemption to inflation. Simply put, it’s better to be a poor New Yorker in bankruptcy than most other Americans, including New Jersey (“D” average) and Connecticut (“C” average), but given the paper’s title (“No Fresh Start”), the NCLC concluded that no state’s exemptions are sufficient to “keep a debtor’s family from destitution and allow the debtor to continue working as a productive member of society.”
Given that working New Yorkers tend to have higher expenses than Americans elsewhere, it can be harder to stay ahead of debt payments. If you and your family are having problems with debt, it’s worthwhile to discuss the situation with a New York bankruptcy lawyer.
For answers to more questions about exemptions, bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney in Brooklyn Bruce Weiner for a free initial consultation.
