Bankruptcy Basics
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Bankruptcy: New York

Filing bankruptcy in New York aims to achieve two things:  First, it gives debtors a chance to overcome crushing debt, and second it allows creditors to be repaid to the extent that the debtor’s property value or earnings permit. 55,596 bankruptcies were filed in New York in 2010, ranking New York 42nd in the country for the number of bankruptcy filings per capita. 81% of New York’s bankruptcy petitions in 2010 sought protection under Chapter 7 bankruptcy.

Filing Bankruptcy in New York

Federal law governs bankruptcy proceedings in New York, and as such all bankruptcy cases are filed in the US Bankruptcy Courts located in:

  • New York Northern District Court: Albany, Syracuse, Utica
  • New York Eastern District Court: Brooklyn, Hauppauge, Westbury
  • New York Western District Court: Batavia, Buffalo, Mayville, Niagara Falls, Olean, Rochester, Watkins Glenn
  • New York Southern District Court: New York, Poughkeepsie, White Plains

While federal courts have jurisdiction over bankruptcy proceedings, New York law allows petitioners to use the exemptions listed in the U.S. bankruptcy code or listed under New York state law. The federal and state exemption systems cannot be mixed and matched. With the guidance of a bankruptcy attorney New York debtors can gain a full understanding of what personal property the systems permit the petitioner to keep in bankruptcy, and what must be sold.

Chapter 7 Bankruptcy, New York

Chapter 7 bankruptcies in New York are the most common bankruptcy filing.  Chapter 7 is best suited to petitioners who do not have significant assets such as investments or substantial equity in a home, for the reason that a Bankruptcy Trustee may liquidate personal property that isn’t protected by New York’s bankruptcy exemptions. Liquidation occurs when the Trustee converts personal assets to cash for distribution to creditors. New York’s Chapter 7 bankruptcy law allows debtors to keep some essential property and the exempt assets are strictly off-limits to creditors seeking repayment.

The vast majority of Chapter 7 cases are “no-asset” cases where no property is taken.

New York Bankruptcy Exemptions

New York bankruptcy law designates specific property exemptions that permit debtors to keep certain personal property and assets so they may move forward from bankruptcy as productive members of society.  In real terms, this means the creditors cannot force a debtor to sell the shirt off their back.  Bankruptcy in New York permits petitioners to choose exemptions only from the federal or state lists.

Property exemption amounts are subject to change, so it is suggested that individuals or couples considering bankruptcy seek the counsel of a New York bankruptcy attorney and discuss the options open to them.  New York bankruptcy exemptions include:

New York Homestead Exemption

  • Real property including co-op, condo, or mobile home, 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 (Husband and wife may double)

New York Personal Property Exemption

  • In bankruptcy, personal property exemptions claimed may not exceed $10,000 total (including tools of trade and limited annuity)
  • $4,000 total: Motor vehicle. $10,000 if vehicle equipped for a disabled person (Husband and wife may double)
  • $2,500 total: Electronic deposits of exempt payments into bank account within last 45 days
  • $1,000 total: Domestic animal with food to last 120 days
  • Health aids, including service animals with food
  • $600 Banking: Savings and loan
  • 90% of income: Spendthrift trust fund principal, if not created by debtor
  • Security deposit to landlord, utility company
  • Lost future earnings recoveries needed for support
  • College tuition savings program trust fund
  • Personal injury recoveries up to 1 year after receiving
  • Recovery for injury to exempt property up to 1 year after receiving
  • Wrongful death recoveries for person you depended on
  • Church pew or seat and Burial plot without structure to 1/4 acre

New York Tools of the Trade Exemption

  • $600 total: Farm machinery, team and food for 60 days; professional furniture, books and instruments
  • Uniforms, medal, emblem, equipment, horse, arms and sword of member of military

New York Wage Garnishment Exemption

  • 100% of pay of noncommissioned officer, private, or musician in U.S. or N.Y. state armed forces
  • 90% of earned but unpaid wages received within 60 days prior to, and anytime after, filing
  • 90% of earnings from dairy farmer’s sales to milk dealers

New York Public Benefits Exemption

  • Social Security and Public assistance
  • Home relief, local public assistance
  • Aid to blind, aged, disabled
  • Workers’ and Unemployment compensation
  • Veterans’ benefits Work. Comp.
  • Crime victims’ compensation

New York Insurance Exemption

  • $400 per month: Disability or illness benefits
  • $5,000 total: Annuity contract benefits due the debtor, if debtor paid for the contract and if purchased within 6 months prior to filing (Not tax-deferred)
  • Cash surrender value of life insurance
  • Life insurance proceeds and avails if the beneficiary is not the debtor, or if debtor’s spouse has taken out policy
  • Life insurance proceeds, if clause prohibits proceeds from being used to pay beneficiary’s creditors

New York Pensions and Retirement Savings Exemption

  • Public retirement benefits
  • State employees
  • Teachers
  • Village police officers Unconsolidated
  • Volunteer firefighters’ and Volunteer ambulance workers’ benefits
  • ERISA-qualified benefits, IRAs and Keoghs and income needed for support

New York Miscellaneous Exemption

  • Property of business partnership
  • Alimony, child support

Chapter 13 Bankruptcy, New York

In 2010, 19% of petitioners filed for protection under Chapter 13 bankruptcy in New York.  Filing Chapter 13 bankruptcy in New York initiates a financial restructuring process whereby a court-appointed Trustee negotiates with creditors and implements a 3-5 year repayment plan, using the debtor’s future earnings to repay creditors.  Chapter 13 petitioners in New York keep most or all of their property.

How to File Bankruptcy in New York

Eligibility for property exemptions should play a key role in deciding whether to pursue bankruptcy protection from creditors. The goal should be to achieve an outcome that protects major assets and discharges debts. Because each bankruptcy case is unique, a New York bankruptcy attorney can counsel debtors and to understand their financial options regarding Chapter 7 and Chapter 13 bankruptcies.

Bankruptcy Attorney: New York

It is the bankruptcy petitioner’s responsibility to know their rights and obligations as debtors.  A New York bankruptcy attorney can make things easier to understand, particularly in terms of federal laws and exemption systems.  The counsel and support of a New York bankruptcy attorney is valuable to anyone facing the complex and stressful road to personal bankruptcy.