On his way out of office in December 2010, now former New York Gov. David Patterson signed legislation giving people filing for bankruptcy something to celebrate. The bill raises the limits on several state property exemptions and allows debtors to choose between New York and Federal exemption limits.
Property exemptions are the assets protected from creditors trying to satisfy a money judgment during bankruptcy proceedings. New York's exemptions fall into the following categories:
- Homestead
- Motor vehicle
- Cash
- Jewelry and art
- Tool of trade
- Cash, household goods and clothing
Gov. Patterson's signing of the bill allowing increased exemption limits was unexpected, but certainly welcomed.
Old Exemptions vs. New Exemptions
Under the previous New York exemption scheme, creditors could not touch $50,000 of a person's home equity (double that for married couples filing jointly). Now, the limit is $150,000 (doubled for married filing jointly), depending on the county in which the home is located.
The limit on a single motor vehicle increased to $4,000 from $2,400 and the cash limit rose to $1,000 from $0 before. However, cash can be included in an aggregate exemption limited at $10,000. This is up from $5,000 previously. The limit for jewelry and art rose from almost nothing to $1,000. Up to $3,000 of the tools of one's trade are protected, which is up from a previous $600.
Impact on Those Filing for Bankruptcy
These increased exemptions apply to both Chapter 7 and Chapter 13 bankruptcy filings. Because Chapter 7 bankruptcy has more stringent asset requirements than Chapter 13, the new exemptions will help more people file for Chapter 7 bankruptcy, with more property exempt. The higher exemptions may also allow Chapter 13 debtors to reduce their monthly.
More people will choose to file bankruptcy knowing they can protect a significant number of assets from creditors. However, with the option of using either New York or Federal exemptions, one must approach bankruptcy is a careful and strategic way.
If you are considering filing bankruptcy or have already done so, contact an experienced and knowledgeable bankruptcy attorney to discuss your specific situation and your options.
