What happens to my property in bankruptcy
One of the schedules that is filed with a bankruptcy petition is the listing of “exempt” property. Bankruptcy law provides that an individual debtor can protect certain property from the claims of creditors even when filing a bankruptcy either because it is exempt under federal bankruptcy law or under the laws of the debtor’s home state. In New York, you are given a choice when you file bankruptcy between using either the state exemptions or using the federal bankruptcy exemptions. For a comprehensive list of property that can be protected in Bankruptcy, please see our What Happens to My Property page.
If you choose to use the federal bankruptcy exemptions, the property that may be protected includes:
• $22,975.00 in equity in your home;
• $3,675.00 in equity in your car;
• $575.00 per item in any household goods up to a total of $12,250.00;
• $2,300.00 in business equipment for work such as tools, books, etc.;
• $1,225.00 in any property, plus up to an additional $11,600.00 in any property whatsoever (the "Wildcard" exemption) if the
exemption in a home is not taken. This can be used to protect additional money in bank accounts, stocks, equity in vehicle,
investment property or anything else up to the value permitted;
• Your right to receive certain benefits such as Social Security, unemployment compensation, veteran’s benefits, public assistance, and pensions--regardless of the amount, are also protected by bankruptcy exemptions.
The amounts of these exemptions are adjusted periodically and are also doubled when a married couple files together. In New York, you also have the option to use the state exemptions which may be more or less generous than the federal exemptions.
New York State Personal Property Exemptions
An individual who chooses to file bankruptcy in New York, also has the option to choose the state bankruptcy exemptions. While the Federal bankruptcy exemptions are more generous generally, there are aspects of New York bankruptcy exemptions that are far more beneficial. Most importantly, is the homestead exemption which allows a debtor to protect equity in their principal up to the following amounts:
The exemption limits apply to the value of the residence above liens and encumbrances, i.e. the debtor's equity in the property. Additionally, this exemption applies to each individual debtor. So, if a house is jointly owned, double the amount of the exemption limit in the residence can be protected.
Debtors in New York that choose to utilize the New York state exemptions may also exempt the following personal property in a bankruptcy filing:
According to N.Y. Debt. & Cred. Law § 283, a debtor can exempt an aggregate of personal property, including the items listed above, not exceeding $10,000.
If a debtor does not use the entire $10,000 exemption in personal property, the debtor can additionally exempt cash not to exceed the difference between $10,000 and the property exempted, or $5,000 in cash, whichever is less. Cash means currency, savings bonds, bank accounts, and tax refunds not yet received. Note: The New York state cash exemption may not be used if the homestead exemption is used.
Under the N.Y. Debtor & Creditor Law, the following property is also exempt in bankruptcy:
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. That means you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you have only $10,000 in equity. You can fully protect the $50,000 home with a $10,000 exemption.
While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
WHAT WILL HAPPEN TO MY HOME AND CAR IF I FILE BANKRUPTCY?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.
However, some of your creditors may have a “security interest” in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
In a chapter 13 case, you may be able to keep certain secured property by paying the creditor the value of the property rather than the full amount owed on the debt. Or you can use chapter 13 to catch up on back payments and get current on the loan.
There are also several ways that you can keep collateral or mortgaged property after you file a chapter 7 bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.
If you choose to use the federal bankruptcy exemptions, the property that may be protected includes:
• $22,975.00 in equity in your home;
• $3,675.00 in equity in your car;
• $575.00 per item in any household goods up to a total of $12,250.00;
• $2,300.00 in business equipment for work such as tools, books, etc.;
• $1,225.00 in any property, plus up to an additional $11,600.00 in any property whatsoever (the "Wildcard" exemption) if the
exemption in a home is not taken. This can be used to protect additional money in bank accounts, stocks, equity in vehicle,
investment property or anything else up to the value permitted;
• Your right to receive certain benefits such as Social Security, unemployment compensation, veteran’s benefits, public assistance, and pensions--regardless of the amount, are also protected by bankruptcy exemptions.
The amounts of these exemptions are adjusted periodically and are also doubled when a married couple files together. In New York, you also have the option to use the state exemptions which may be more or less generous than the federal exemptions.
New York State Personal Property Exemptions
An individual who chooses to file bankruptcy in New York, also has the option to choose the state bankruptcy exemptions. While the Federal bankruptcy exemptions are more generous generally, there are aspects of New York bankruptcy exemptions that are far more beneficial. Most importantly, is the homestead exemption which allows a debtor to protect equity in their principal up to the following amounts:
- $150,000 – Nassau, Suffolk, Kings, Queens, New York, Bronx, Richmond, Westchester, Rockland and Putnam Counties
- $125,000 - Dutchess, Albany, Columbia, Orange, Saratoga and Ulster Counties
- $75,000 - All other counties
The exemption limits apply to the value of the residence above liens and encumbrances, i.e. the debtor's equity in the property. Additionally, this exemption applies to each individual debtor. So, if a house is jointly owned, double the amount of the exemption limit in the residence can be protected.
Debtors in New York that choose to utilize the New York state exemptions may also exempt the following personal property in a bankruptcy filing:
- All stoves and heating equipment for use in the debtor’s home
- Books up to $500 in value, in addition to religious texts, family pictures and portraits and school books
- Domestic animals in value up to $1,000
- All wearing apparel
- Household furniture
- One refrigerator
- One television
- One computer
- One cell phone
- Cooking Utensils and Tableware
- A wedding ring
- Jewelry and art not exceeding $1,000
- Trade tools not exceeding $3,000
- If no homestead exemption is claimed, then $1,000 in additional personal property, cash or bank account
- Certain trust property for the debtor created by a person other than the debtor
According to N.Y. Debt. & Cred. Law § 283, a debtor can exempt an aggregate of personal property, including the items listed above, not exceeding $10,000.
If a debtor does not use the entire $10,000 exemption in personal property, the debtor can additionally exempt cash not to exceed the difference between $10,000 and the property exempted, or $5,000 in cash, whichever is less. Cash means currency, savings bonds, bank accounts, and tax refunds not yet received. Note: The New York state cash exemption may not be used if the homestead exemption is used.
Under the N.Y. Debtor & Creditor Law, the following property is also exempt in bankruptcy:
- Social security benefits
- Unemployment compensation
- Local public assistance benefits
- Veterans’ benefits
- Disability or illness benefits
- Alimony or domestic support payments to the extent necessary for support
- Pension and qualified retirement plan payments
- One motor vehicle valued up to $4,000, or $10,000 if equipped for use by a disabled debtor, above liens and encumbrances
- A payment, not to exceed $7,500, on account of personal injury
In determining whether property is exempt, you must keep a few things in mind. The value of property is not the amount you paid for it, but what it is worth when your bankruptcy case is filed. Especially for furniture and cars, this may be a lot less than what you paid or what it would cost to buy a replacement.
You also only need to look at your equity in property. That means you count your exemptions against the full value minus any money that you owe on mortgages or liens. For example, if you own a $50,000 house with a $40,000 mortgage, you have only $10,000 in equity. You can fully protect the $50,000 home with a $10,000 exemption.
While your exemptions allow you to keep property even in a chapter 7 case, your exemptions do not make any difference to the right of a mortgage holder or car loan creditor to take the property to cover the debt if you are behind. In a chapter 13 case, you can keep all of your property if your plan meets the requirements of the bankruptcy law. In most cases you will have to pay the mortgages or liens as you would if you didn’t file bankruptcy.
WHAT WILL HAPPEN TO MY HOME AND CAR IF I FILE BANKRUPTCY?
In most cases you will not lose your home or car during your bankruptcy case as long as your equity in the property is fully exempt. Even if your property is not fully exempt, you will be able to keep it, if you pay its non-exempt value to creditors in chapter 13.
However, some of your creditors may have a “security interest” in your home, automobile, or other personal property. This means that you gave that creditor a mortgage on the home or put your other property up as collateral for the debt. Bankruptcy does not make these security interests go away. If you don’t make your payments on that debt, the creditor may be able to take and sell the home or the property, during or after the bankruptcy case.
In a chapter 13 case, you may be able to keep certain secured property by paying the creditor the value of the property rather than the full amount owed on the debt. Or you can use chapter 13 to catch up on back payments and get current on the loan.
There are also several ways that you can keep collateral or mortgaged property after you file a chapter 7 bankruptcy. You can agree to keep making your payments on the debt until it is paid in full. Or you can pay the creditor the amount that the property you want to keep is worth. In some cases involving fraud or other improper conduct by the creditor, you may be able to challenge the debt. If you put up your household goods as collateral for a loan (other than a loan to purchase the goods), you can usually keep your property without making any more payments on that debt.