One of the biggest misconceptions that I hear most from my clients is that they think that when they file for bankruptcy that they will somehow have to surrender all of their property. This is incorrect. In fact, New York has an extensive list of property and the dollar amount of each type of property that you can retain, even though you are wiping out your debt in a chapter 7 bankruptcy in New York. Let’s go over a few items you can keep…
Your Home: If you own your home, then you can keep $50,000 of the equity in your home. Let’s learn this by way of example. For instance, let’s say you have a home worth $250,000. You have a mortgage of $220,000. That means you have $30,000 of equity in your home. New York’s homestead exemption, allows a debtor to retain $50,000 of equity in his home, so in this case you could keep the home. However, if the mortgage was only $190,000, that would mean you would have $60,000 of equity in your home and that $10,000 of the equity in your home would not be exempt. Hypothetically, the bankruptcy trustee assigned to your case, could sell your home in this situation, pay you the $50,000 and use the remaining $10,000 to pay off your creditors. In practice though, unless it is a significant amount of equity, the trustee will probably not bother. Of course, I make no guarantees.
Keep in mind, if you are married then you can double the $50,000 homestead exemption amount to keep $100,000 of equity in your home.
Your Car: According to the New York exemption laws you can retain $2,400 in equity in one of your cars if you file bankruptcy. By way of example, if you have a car worth on the market today $5,000 and it is totally paid off, then you have $5,000 of equity in the car. Hypothetically, the trustee could sell the car, pay you the $2,400 of equity you get to retain in bankruptcy, and distribute the $2,600 to your creditors. Again, in practice the trustee will only go through the trouble of selling your car if there is a significant amount of money he can distribute to your creditors. If in this same example, the car was financed for $3,000 then you have $2,000 of equity in the car and the car would be totally exempt. As long as you continue to pay the financing, then you can keep the car.
401K/IRA: Debtor can retain all of the money up to a certain figure for the money that he has placed in a retirement account.
Personal Property: There is a $5,000 aggregate amount you can exempt in personal property. This can get a little complicated so it is best to speak with me about how this $5,000 personal property exemption applies.