In a move that put New York in the forefront of consumer-friendly states for filing bankruptcy, Governor Patterson, in one of his last official moves, signed into law a bill that generously increases exemptions for individuals seeking bankruptcy protection.
The result is that people who before might not have been able to save their homes in bankruptcy may now be able to file for bankruptcy without any risk of losing their home. Staten Island bankruptcy attorney Paul Hollender, of the law firm Corash & Hollender, P.C., noted that these dramatic changes received little attention because they occurred over the Christmas holiday period.
"In my 34-plus years as a bankruptcy attorney, this has been one of the more dramatic changes." He observed that, "Many deserving Staten Islanders have been to my office over the past year seeking relief due to job loss, illnesses, death of a spouse, divorce or other cause of greatly reduced household income. They are struggling to pay their mortgage, and simply cannot afford to pay their credit card bills with 30 percent interest, late charges and over-the-limit fees." Until this new law passed, we were forced to tell many of them that filing for bankruptcy would put their homes at risk. Now, at last, we can offer meaningful relief to this extensive group.
The most significant provision of the new law, which went into effect on January 21, 2011, increases the amount of equity a consumer may protect in his or her residence, over and above the balances on mortgages and home equity loans. The limit was $50,000 per individual owner. The new exemption is $150,000 per owner for residents of New York City, Nassau, Suffolk, Westchester and Rockland counties. In other areas of the state, the exemption will increase to either $100,000 or $125,000 per person.
This new law will enable thousands of cash-strapped consumers with substantial home equity to file Chapter 7 bankruptcy to discharge credit card debt and still keep their homes. More specifically, under the new law, a married couple owning their home in both names can now safely file Chapter 7 bankruptcy to eliminate credit card debt, without risk of the bankruptcy trustee selling their home to pay their credit card debts, providing that the equity above their mortgage is less than $300,000.
Motor Vehicle Exemption
A second important change is to increase the exemption for a personal motor vehicle from $2,400 per person to $4,000. Previously many individuals were forced to "buy-back" the equity in their cars and trucks from the bankruptcy trustee. Under the new law, since few people have more than $4,000 of equity in their cars, it will be easier to file bankruptcy and keep your car.
A special change in this exemption is to now provide protection of up to $10,000 for equity in a motor vehicle specially equipped for an individual with a disability.
Other New York Exemption Changes
In addition to the homestead exemption, the new law increases the jewelry exemption from $35 to $1,000. The law also increases the tools of the trade exemption from $600 to $3,000.
Option to Use Federal Exemptions
In the past, New Yorkers were not allowed to use nationwide federal exemptions, which in some cases were more generous than New York state allowed. This has now changed. For example, it may now be possible to take a general exemption in any property up to approximately $11,000 by choosing the federal exemption scheme. The rules are complicated, but we can figure out what is best for you.
Other Exempt Property
In addition to the foregoing, the law protects pensions, IRAs, 401(k)s and retirement annuities, college savings plans, Social Security Disability, unemployment benefits and workers' compensation awards, alimony and support payments, most life insurance and $7,500 in accident case proceeds.
Income Ceiling Still Exists
The new exemption law, however, does not change the income ceilings for Chapter 7 eligibility that Congress imposed in 2005. That ceiling varies by household size. Currently, for example, the ceiling for a family of five in New York is about $90,000. If your household income exceeds the ceiling for your size household you may be required to file a payment plan under Chapter 13. With the help of an experienced bankruptcy attorney, it may nevertheless be possible to file for Chapter 7. Our attorneys and highly trained staff will work hard to get you the best result possible.
Using Chapter 13 to Protect Nonexempt Assets
If you have assets that are not exempt, we still protect them by filing a Chapter 13 payment plan. This allows you to pay an amount equivalent to the value of nonexempt assets and keep the asset. We can get you five years to make the payments, in monthly installments. The payments are made to the bankruptcy trustee who distributes the money to creditors. Unlike debt settlement companies, Chapter 13 is supervised by the court and the trustee is bonded. It is generally necessary to retain the services of an experienced bankruptcy lawyer to assist the consumer through the process. However, the fees for a qualified attorney are generally no more than the fees that unregulated, out-of-state, non-attorney debt settlement companies charge.
Contact Our New York City Lawyers for Help With Property Liens
If you have had a lien placed against your property or are curious how bankruptcy exemptions can benefit you, speak with us. Contact us online or call 718-442-4424 to schedule an appointment to discuss your situation.
We are a debt relief agency. We help people file for bankruptcy relief under the Bankruptcy Code.