For about a decade, New York bankruptcy debtors have been able to choose which set of exemptions to use to protect their assets, federal or state. For most debtors, notably those who aren’t homeowners, the federal exemptions are the best option because they provide a larger cash exemption. The state exemptions, by contrast, are better for homeowners because the homestead exemption is significantly greater. The question debtors will have, though, is what happens when the exemptions can’t protect everything?
Beginning with houses and other secured assets, the first option debtors have is to file in chapter 13. This option permits debtors to continue paying their mortgages, catch up on arrearages, and keep their properties.
Even at this point, though, there are still a few types of situations in which debtors might be “asset rich” and “cash poor” to the extent that bankruptcy simply won’t work for them. For instance, debtors might own secondary vehicles such as motorcycles, fishing boats, or more commonly for New Yorkers, high-performance bicycles, that just can’t be protected by exemptions. These debtors may also lack the income necessary to keep these properties through a chapter 13 repayment plan. It’s possible they owe so much money to these secured creditors that they can’t repay the arrearages even if they’re capped and interest free in chapter 13. Perhaps a crammed-down vehicle can’t be paid for. What then?
These are situations in which debtors can’t afford to file bankruptcy. They don’t have the income, and the Bankruptcy Code doesn’t give them the options that they need. The unpleasant responses are that debtors can simply learn to live without certain assets or try to earn more money to be able to afford them. Often the former is not a viable option, but it’s not easy for debtors to accept the latter.
If you are experiencing financial difficulties, and you’re concerned bankruptcy will not do you much good, then talking to an experienced New York bankruptcy lawyer can still help you explore alternative options. For some debtors, there are ways to keep cherished property when bankruptcy won’t allow it.
For answers to more questions about bankruptcy, the automatic stay, effective strategies for dealing with foreclosure, and protecting your assets in bankruptcy please feel free to contact experienced bankruptcy attorney Brooklyn NY Bruce Weiner for a free initial consultation.
