Bankruptcy Exemptions
INTRODUCTION TO BANKRUPTCY EXEMPTIONS: FILING BANKRUPTCY DOES NOT MEAN YOU WILL LOSE EVERYTHING.
People are not required to forfeit all of their property when they file bankruptcy. Bankruptcy laws are intended to use individuals’ property to satisfy as many debts as is reasonably possible. The process is not intended to pauperize people. In order to avoid this result, bankruptcy law exempts certain property, up to a maximum value, from the bankruptcy estate. Property that is exempt from the estate is not forfeited in the bankruptcy. That means individuals may keep the exempt property even after they file bankruptcy, as long as the value of that property does not exceed the statutory limit. Federal law allows states to replace the federal exemption scheme with their own. New York allows individuals to choose between federal and state exemptions. Both federal and New York law essentially exempts the same types of property, but the two laws place different limits on each type. This means that people may be able to keep more of their property under one law rather than the other, depending on the types of property they own at the time they file bankruptcy.
Exempt property generally falls under five categories:
1. Basic Necessities and intimate personal items: This category includes personal items such as wedding rings, religious texts, domestic animals, a certain amount of cash, and a home (up to a maximum value).
2. Insurance policies and annuities: Payments individuals receive from insurance claims or annuities may be exempt. This means that after individuals file bankruptcy, they may still receive, for example, payments received under a life insurance plan taken out on a deceased spouse.
3. Motor Vehicles: Individuals may keep an automobile, as long as its value does not exceed a certain limit.
4. Benefits: Benefits such as social security, unemployment, veterans and disability payments may be exempt.
5. Property due under a money judgement: Individuals that receive payments following some lawsuits – such as personal injury, wrongful death, or others – may keep this income, up to a certain value limit.
Again, property exempted under these categories may not exceed certain values, though there may be exceptions and extensions in certain situations. The topic of bankruptcy exemptions is very complicated, and some issues are disputed even among experts. For more information on exemptions, see our earlier posts Changes to NY Bankruptcy Exemptions and Federal Bankruptcy Exemptions & NY .
If you have any questions about bankruptcy and would like to speak to an attorney, please call the Law Firm of Vaughn, Weber & Prakope, PLLC at (516) 858-2620 today to schedule a free consultation.
As stated in two earlier posts, Governor Paterson has signed into law S.7034-A/A.8735-A which will increase the amount of New York’s bankruptcy exemptions and allow NY debtors to choose the Federal or State exemptions. A new section 285 will be added to the Debtor and Creditor Law permitting NY debtors to choose either the current Federal exemptions enumerated in 11 U.S.C. 522(d) (see below) or the new New York exemptions (see Changes to NY Bankruptcy Exemptions) .
The Federal Exemptions available under 11 U.S.C. 522(d) are:*
(1) The debtor’s aggregate interest, not to exceed $21,625 in value, in real property or personal property that the debtor or a dependent of the debtor uses as a residence, in a cooperative that owns property that the debtor or a dependent of the debtor uses as a residence, or in a burial plot for the debtor or a dependent of the debtor.
(2) The debtor’s interest, not to exceed $3,450 in value, in one motor vehicle.
(3) The debtor’s interest, not to exceed $550 in value in any particular item or $11,525 in aggregate value, in household furnishings, household goods, wearing apparel, appliances, books, animals, crops, or musical instruments, that are held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.
(4) The debtor’s aggregate interest, not to exceed $1,450 in value, in jewelry held primarily for the personal, family, or household use of the debtor or a dependent of the debtor.
(5) The debtor’s aggregate interest in any property, not to exceed in value $1,150 plus up to $10,825 of any unused amount of the exemption provided under paragraph (1) of this subsection.
(6) The debtor’s aggregate interest, not to exceed $2,175 in value, in any implements, professional books, or tools, of the trade of the debtor or the trade of a dependent of the debtor.
(7) Any unmatured life insurance contract owned by the debtor, other than a credit life insurance contract.
(8) The debtor’s aggregate interest, not to exceed in value $11,525 less any amount of property of the estate transferred in the manner specified in section 542(d) of this title, in any accrued dividend or interest under, or loan value of, any unmatured life insurance contract owned by the debtor under which the insured is the debtor or an individual of whom the debtor is a dependent.
(9) Professionally prescribed health aids for the debtor or a dependent of the debtor.
(10) The debtor’s right to receive–
(A) a social security benefit, unemployment compensation, or a local public assistance benefit;
(B) a veterans’ benefit;
(C) a disability, illness, or unemployment benefit;
(D) alimony, support, or separate maintenance, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(E) a payment under a stock bonus, pension, profitsharing, annuity, or similar plan or contract on account of illness, disability, death, age, or length of service, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor, unless–
(i) such plan or contract was established by or under the auspices of an insider that employed the debtor at the time the debtor’s rights under such plan or contract arose;
(ii) such payment is on account of age or length of service; and
(iii) such plan or contract does not qualify under section 401(a), 403(a), 403(b), or 408 of the Internal Revenue Code of 1986.
(11) The debtor’s right to receive, or property that is traceable to–
(A) an award under a crime victim’s reparation law;
(B) a payment on account of the wrongful death of an individual of whom the debtor was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(C) a payment under a life insurance contract that insured the life of an individual of whom the debtor was a dependent on the date of such individual’s death, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor;
(D) a payment, not to exceed $21,625, on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor is a dependent; or
(E) a payment in compensation of loss of future earnings of the debtor or an individual of whom the debtor is or was a dependent, to the extent reasonably necessary for the support of the debtor and any dependent of the debtor.
(12) Retirement funds to the extent that those funds are in a fund or account that is exempt from taxation under section 401, 403, 408, 408A, 414, 457, or 501(a) of the Internal Revenue Code of 1986.
*as of 10/8/10.
We proudly assist residents of Long Island (Nassau county, Suffolk county) and New York City (Queens, Brooklyn, Bronx, Staten Island, Manhattan) with their bankruptcy filings. We are conveniently located in the heart of Nassau County, Long Island, at 393 Jericho Tpke., Ste. 208, Mineola, NY 11501.
Call (516) 858-2620 to arrange a FREE consultation with a bankruptcy attorney!
Governor David A. Paterson has signed into law S.7034-A/A.8735-A, which will increase the amount of New York’s bankruptcy exemptions and allow NY debtors to choose the federal (see Federal Bankruptcy Exemptions & NY) or the new New York state exemptions.
The following is a summary of the changes:
- Increases the homestead exemption under Section 5206 of the CPLR from $50,000 to: $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state;
- Increases motor vehicle exemption under section 282 of the Debtor and Creditor Law from $2,400 to $4,000 for one motor vehicle. If such vehicle is equipped for use by a disabled person, the exemption amount is $10,000 in bankruptcy;
- Increases the amount of the aggregate individual bankruptcy exemption for certain annuities and personal property under section 283 of the debtor and creditor law from $5,000 to $10,000;
- Adds a new section 285 to the Debtor and Creditor Law permitting debtors to choose either the current federal exemptions or the new New York exemptions;
- Increase the exemption for books and religious texts from $50 to $500;
- Increases the domestic animals and food exemption from $450 to $1,000;
- Increases one watch from $35 to $1,000 and adds jewelry and art to this category;
- Increases the tools of trade exemption from $600 to $3,000;
- Adds a wildcard exemption, if no homestead exemption is claimed, of $1,000 for personal property, bank account, or cash;
- Provides for the exemption of one computer and associated equipment, and one cell phone;
- Exempt up to $6000 cash if no homestead exemption taken and aggregate individual bankruptcy exemption totals $5000 or less.
The entire bill can be found here or here .
We proudly assist residents of Long Island (Nassau county, Suffolk county) and New York City (Queens, Brooklyn, Bronx, Staten Island, Manhattan) with their bankruptcy filings.
Call (516) 858-2620 to arrange a FREE consultation with a bankruptcy attorney!
Governor Paterson has signed into law a bill that will increase many of New York’s bankruptcy exemptions; including the motor vehicle and homestead exemptions. Additionally, New Yorkers will now also be allowed to choose between using the federal or state exemptions.
A summary of the changes can be found here.
The entire bill can be found here.
The following is a Press Release issued by the Governor’s office.
Governor David A. Paterson today announced he has signed into law S.7034-A/A.8735-A, which will increase the amount of exemptions in bankruptcy proceedings and money judgments and provide a choice between State and Federal exemptions. The Governor also announced that he has vetoed two bills.
“During this time of economic crisis, it is our responsibility as public servants to protect those who are struggling the most,” Governor Paterson said. “A reconsideration of the current exemptions, which in some cases have not been changed in decades, is particularly warranted when an increasing number of individuals find themselves in dire financial condition. Though this is not a perfect bill, the benefits far outweigh its concerns. I understand from legislators and advocacy groups that have supported this bill that they are fully committed to addressing the concerns raised by New York City and others, and I urge the Legislature to do so in the coming year. I’d like to thank Assemblywoman Helene Weinstein for her commitment to passing a chapter amendment to address those concerns.”
This bill would provide a much-needed update to the exemptions law in New York as many provisions of State’s exemptions law are antiquated or have not been amended since the 1980’s. The purpose of such exemptions is to permit debtors in bankruptcy to retain a modest amount of personal property and equity in their homes so that they can continue to maintain their lives, and to protect them from becoming homeless, unemployed, or otherwise dependent on the State.
Included in this legislation is a new exemption from the satisfaction of a money judgment for a vehicle not exceeding $4,000 above the debtor’s liens and encumbrances ($10,000 for a vehicle equipped for use by a disabled person) and a raise of the bankruptcy exemption accordingly. This bill would also increase the homestead exemption from $50,000 to either $75,000, $125,000 or $250,000 depending upon the county of residence.
We proudly assist residents of Long Island (Nassau county, Suffolk county) and New York City (Queens, Brooklyn, Bronx, Staten Island, Manhattan) with their bankruptcy filings.
Call (516) 858-2620 to arrange a FREE consultation with a bankruptcy attorney!
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