New York Bankruptcy Exemptions

New York bankruptcy exemption laws protect property in bankruptcy and are essential to a fresh start. When you file, the New York bankruptcy exemptions will let you keep what you need to work and live. However, exemptions protect essential assets only, not unnecessary luxury goods.

To prevent a costly property loss, you'll want to understand the exemptions available under New York and what happens to property you can't protect with an exemption. In this article, you'll also learn whether you've lived in New York long enough to use New York bankruptcy exemptions.

Using Exemptions When Filing for Bankruptcy in New York

New York filers are fortunate because they have two exemption choices, the state or the federal bankruptcy exemptions. You'll want to review each list carefully and compare it to the property you own because you can't use exemptions from both lists. If you decide to use New York's state exemptions, you can also use the federal nonbankruptcy exemptions.

Choosing an Exemption List in a New York Bankruptcy

To help you make an informed choice, we've charted the New York and federal exemption sets. You'll also find New York and federal exemption links you can use to review the exemption statutes.

Exemption Caution: The state exemptions have not been updated and should not be relied on but only used as a general guide. Some state exemption amounts could be higher, and your state could have changed the law by adding new or deleting old exemptions. Verify exemption availability through research or by consulting a local bankruptcy lawyer.

Other Bankruptcy Exemptions

Below, you'll find more New York exemptions. However, it's not an exhaustive list. Also, as with all laws, exemption laws can change. Be sure to check for current amounts and read the statute for qualification requirements (we haven't included them here).

New York Charitable Benefit, Injury Claim, and Wage Exemptions

• Debtor & Creditor § 282 – Crime victims' compensation, public assistance, Workers' Compensation, unemployment compensation, and veterans benefits.
• Debtor & Creditor § 282(3)(iii) – $10,250 for personal bodily injury; wrongful death benefits as needed.
• Soc. Serv. 137-a - 100% of earnings if receiving public assistance.
• CPLR 5205 – 90% of earned but unpaid wages received within 60 days before & anytime after filing.
• CPLR § 5205; Debtor & Creditor § 282(2)(d) – Court-ordered alimony, maintenance, or child support to the extent reasonably needed for support.

Miscellaneous New York Exemptions

• CPLR § 5205 - Annuity contract benefits due if the debtor paid for the contract.
• § 3212 - Disability, illness, or annuity contract benefits.
• 3212; Est. Pow. & Tr. 7-1.5; C.P.L.R. 5205(i) - Life insurance proceeds.
• Partnership 51 – Business partnership property

Important retirement benefit note. Federal law lets all filers keep tax-exempt retirement accounts in bankruptcy. These retirement accounts include 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and traditional and Roth IRAs to $1,512,350 per person. (11 U.S.C. 522(b)(3)(C); (n); amounts valid for bankruptcy cases filed between April 1, 2022, and March 31, 2025.)

How to Verify Exemptions

Almost everyone who files for bankruptcy benefits from meeting with a bankruptcy lawyer. A local bankruptcy attorney will ensure a smooth and uneventful bankruptcy by complying with filing requirements and helping you protect all possible property.

What Are the Bankruptcy Exemption Timing Rules?

It's tempting to move to a state with significantly more generous bankruptcy exemptions when filing for bankruptcy. But it doesn't work that way. Filers must live in the state for at least two years to prevent people from abusing the system. Otherwise, they must use the previous state's exemptions. Here's how it works.

• If you've made your permanent home (your "domicile") in your current state for at least two years, you can use the state's exemptions (or the federal exemptions if allowed).
• If your domicile hasn't been in the same state for two years, the rules get more complicated, so prepare yourself. It sounds so strange that we'll explain it in three ways so that you know you didn't read it wrong. Here goes: You'll choose the state you lived in the longest during the 180 days immediately before the two years before filing.

Did you get that? If not, here's a way to figure it out. Count back two-and-a-half years. Then ask yourself where you lived the longest during the first six months of that two-and-a-half-year period.

Still confused? Let's try an example. Suppose you planned to file on January 1, 2022. Your two-and-a-half-year period would start July 1, 2019, and you'd qualify to use the exemptions of whichever state you resided in the most from July 1, 2019, through December 31, 2019. You wouldn't have to file your case there, but you'd use that state's exemptions. Hopefully, that helps!

Special Homestead Exemption Rules

The homestead exemption protects your ownership interest in your home. You'll need to read your state's homestead statute to determine the specifics, such as the amount of equity and acreage covered, whether the exemption protects a manufactured home, and if you need to file a homestead exemption with the county clerk. But in all states, the property must be your residence.

You must live in the home for over 40 months before filing for bankruptcy. Otherwise, your homestead exemption is capped at $189,050 if you file on or after April 1, 2022 (the amount changes every three years). This cap won't apply if you bought your home with home sales proceeds from that state.

What Happens to Property You Can't Exempt in Bankruptcy?

It will depend on the chapter you file. In Chapter 7 bankruptcy, you lose property not covered by an exemption. The bankruptcy trustee responsible for managing your case will sell the property for the benefit of your creditors.

In Chapter 13 bankruptcy, you can keep all your property. However, that luxury comes at a price. You'll pay your creditors the value of any property not covered by an exemption in your Chapter 13 repayment plan.

For example, say you own a car outright worth $3,000, and your state has a vehicle exemption of up to $5,000. Here's what would happen in each chapter.

• Chapter 7 Bankruptcy. If you file for Chapter 7 bankruptcy, you will get to keep your car because the exemption would protect the equity fully. In the same example, if your vehicle were worth $15,000, the bankruptcy trustee would sell your vehicle, pay you $5,000 for the exemption, and distribute the rest to your unsecured creditors.
• Chapter 13 Bankruptcy. In Chapter 13, you wouldn't need to pay extra to your creditors through your repayment plan. However, if the car were worth $15,000, you'd need to pay your creditors at least $10,000 (minus sales costs) through your plan.

Keep in mind that these examples don't take into account a vehicle loan. You'll find more information about protecting financed homes and cars in a New York bankruptcy below.

How Do You Protect a Financed Home or Car in Bankruptcy?

Many wonder if they can wipe out a home mortgage or car loan and keep the property without paying for it. The simple answer is "No." If you still owe a balance on your mortgage or car loan, you must pay as agreed to prevent the lender from foreclosing or repossessing the property.

Why? Because when you purchased it, you gave the lender a property "lien." The lien created a secured debt, allowing the lender to take back the property if you don't pay as agreed, even in bankruptcy.

Protecting Financed Property in Chapter 7 Bankruptcy

Chapter 7 doesn't have a mechanism that will allow you to catch up on a mortgage or car payment over time. So, the mortgage or car payment must be current. You'll lose the property if you're behind on the payment and file for Chapter 7.

The lender will ask the bankruptcy court to allow the lender to proceed with foreclosure or repossession during the bankruptcy or wait until Chapter 7 ends.

A few more vehicle protection options exist in Chapter 7. Learn more about how to file for bankruptcy without losing a car.

Protecting Financed Property in Chapter 13 Bankruptcy

You don't lose property in Chapter 13. However, before the bankruptcy judge approves or "confirms" your plan, you must prove you earn enough to make the monthly payment and pay the late payments by the end of the three- to five-year plan.

Some filers can pay less on financed property if they qualify to reduce an auto loan to the car's value or strip a junior mortgage, credit line, or lien from a home. Learn more about catching up on arrearages in Chapter 13 and how mortgages work in bankruptcy.

Navigating Your Bankruptcy Case

Bankruptcy is essentially a qualification process. The laws provide instructions for completing a 50- to 60-page bankruptcy petition, and because the rules apply to every case, you can't skip a step. We want to help you find the answers you need.

Below is the bankruptcy form for this topic and other resources we think you'll enjoy. For more easy-to-understand articles, go to TheBankruptcySite, or consider buying a self-help book like The New Bankruptcy by Attorney Cara O'Neill.

We wholeheartedly encourage research and learning, but online articles can't address all bankruptcy issues or the facts of your case. The best way to protect your assets in bankruptcy is by hiring a local bankruptcy lawyer.