The goal of bankruptcy is to reduce financial pressure so you can get back on your feet. Depending on the type of bankruptcy utilized, you could see your debts wiped out in a blank slate reboot, or they will instead be condensed down into more manageable payments. With the former option, you will likely end up losing assets you built up over your life. There are a number of exemptions available that allow you to keep things you need to continue functioning, however.
What You Can and Can’t Exempt From New York Bankruptcy
With Chapter 7 bankruptcy, any assets that aren’t specifically exempted will be liquidated and used to pay off a portion of your debts. Of course, bankruptcy isn’t meant to leave a person homeless and destitute, which is why the court allows a range of exemptions to the liquidation process.
Here's where things can get tricky. The specific exemptions you can use are different at the state and federal levels. While you have the leeway to pick whichever option is best for your particular financial situation, this is an entirely “one or the other” scenario. You can’t take some exemptions from the state side and others from the federal side to get the best deal.
In many cases, the New York state exemptions are better overall, especially for homeowners. If you don’t own a home but have other valuable property you want to keep, there are instances where the federal exemption may be better for your specific situation.
The New York state list of Chapter 7 bankruptcy exemptions specifically covers:
- Your house, condo, co-op, or mobile home up to a specific amount of equity. The max equity value varies by county, due to the wide range in housing costs across the state.
- One personal motor vehicle up to a specific dollar cap, which is higher if the vehicle is equipped to aid a disabled driver.
- Items like heating equipment, furniture, clothing, a fridge, kitchenware, personal computer, religious worship items, school textbooks, and health aids.
- A “wildcard” exemption for a small amount of other personal property, but only if you don’t use the homeowner’s exemption. The federal wildcard exemption is often higher than the state amount.
- Tools necessary for your profession, up to certain dollar value amounts.
- Income earned, up to 90%, in the 60 days prior to filing for bankruptcy.
- Military pensions and awards.
- Child support or alimony.
- Social Security, veteran’s benefits, unemployment, and financial assistance for disabilities.
- Workers' compensation and certain court judgments or settlements, such as personal injury or wrongful death payouts.
- Property or assets held in certain kinds of trusts created before bankruptcy began.
An experienced bankruptcy lawyer’s assistance is critical when filing exemptions. An attorney can help you decide whether to take the state or federal exemptions and keep you updated on the specific capped amounts for each category, as they are adjusted every few years. You also need to be aware that purposefully underestimating asset values to try to keep things you would normally lose in bankruptcy constitutes fraud and comes with severe legal penalties.
Other important considerations should be discussed with a legal professional before filing for bankruptcy. For instance, married couples who file taxes jointly can gain access to double the normal exemption amounts if both spouses have a stake in the property.
An attorney can also fill you in on what bankruptcy doesn’t cover. In many cases, bankruptcy won’t discharge student loan debt at all unless you can prove it would cause an undue hardship that you can’t possibly repay. Speak to a lawyer early so you have all the answers you need throughout the court proceedings.
Start the Process of Getting Back on Your Feet Financially
Bankruptcy is a complicated and emotionally draining procedure, but it may be necessary to protect your financial future. Before taking this route, you want someone in your corner who understands the process from beginning to end and can help you avoid common pitfalls. If you are considering filing for bankruptcy, call Alatsas Law Firm today and let us know about your situation so we can help you find the best exemptions possible.