Middletown Lawyers Explain New York and Federal Bankruptcy Exemptions

Helping clients in the Mid-Hudson Valley understand which properties are exempt

For more than two decades, Hayward, Parker & O’Leary Esqs. has provided high quality but affordable bankruptcy services. At the Middletown law office, you receive individualized service with clear, concise explanations. Many potential clients come to our office confused about bankruptcy exemptions and how they fit into the bankruptcy process. Quite simply, bankruptcy exemptions are types of property that you can protect from your creditors and the bankruptcy trustee. Stated differently, exempt property is property that you keep.

Many potential clients are also aware that they may have a choice in the exemptions they select but are curious about what choice they have. Under New York law, a person who has been a New York resident for two or more years may select either the New York exemptions or the federal exemptions. Those who have lived in New York for less than two years may select the exemptions provided under the laws of the state where they lived for a minimum of six months during the two-year period or the federal exemptions.

Under both the federal exemptions and New York exemptions, each person is individually entitled to exemptions. If a husband and wife file for bankruptcy jointly, they may double their exemption so that each partner receives their individual exemption. However, each partner must employ the same exemption scheme—the husband cannot claim the federal exemptions while the wife claims the New York exemptions.

What exemptions does New York offer?

The exemptions offered under New York law are numerous. While only a detailed consultation with an experienced bankruptcy lawyer can identify which set of exemptions best fit your circumstances, some typical exemptions include:

• Residence — The homestead exemption protects equity in your home, mobile home, cooperative, apartment or condominium. Remember that equity is the value of the property less all liens secured by it such as mortgages, judgments and tax liens. The amount of the homestead exemption is determined by the location of your residence. The exemption is:
  • $150,000 in Queens, the Bronx, Harlem, Brooklyn, Manhattan, or Nassau, Suffolk, Westchester, Rockland or Putnam County
  • 125,000 in Orange, Ulster, Dutchess, Columbia, Saratoga or Albany county
  • $75,000 in Sullivan, Greene and all other counties upstate
• Motor vehicle — If you are identified as a sole or joint owner on the vehicle title, you may exempt $4,000 in equity. For a disabled person the exemption increases to $10,000.
• Government benefits — Veterans Administration (VA), Social Security and Aid to Families with Dependent Children (AFDC) are all exempt under New York law.
• Retirement plans — IRAs, Keogh plans, and 401k plans all receive unlimited exemptions.
• Alternative Cash Exemption — If a debtor is not using a homestead exemption they can exempt up to $5,000.00 in cash on hand, funds on deposit in bank accounts and anticipated tax refunds. In a joint filing, one debtor can choose to claim the homestead exemption while the other can claim this $5,000.00 “alternative cash exemption”.

There are many more New York bankruptcy exemptions, including exemptions for death benefits, military pay, alimony and support, deposits on rent or utilities, shares held in a savings and loan, domestic animals, books and a wild card.

What exemptions are offered at the federal level?

While the federal exemptions mirror many of the exemption categories of New York law, they are generally more generous, except for the homestead and vehicle exemptions. The federal homestead exemption is only $22,975 or $45,950 for a married couple filing jointly. Likewise, the federal vehicle exemption is only $3,675, with no provision to increase the exemption for the disabled. On the other hand, the exemption for personal injury claims is much greater under the federal exemptions —$22,975 under federal law versus only $7,500 under NY law.  However, the most attractive feature of the federal exemptions is the more generous “wildcard” exemption, which can be used to protect any asset. New York has a modest “wildcard” exemption of $1,000, providing no homestead exemption is being claimed. With the federal exemptions, you can claim a homestead exemption of up to $11,475 and still claim the maximum “wildcard” exemption, which is $12,725. If it is necessary to claim a homestead exemption above the $11,475 mark, the available “wildcard” exemption is reduced by a corresponding amount. A married couple filing jointly who have minimal equity in their residence (or are renters) have a combined “wildcard” exemption at their disposal of $25,450, to be applied where the debtors choose. Understanding which set of exemptions is most beneficial to you can only be accomplished through a detailed consultation.

Contact us today to determine which set of exemptions benefit you the most

New York law gives New York residents options to work with under bankruptcy law. An experienced attorney can assist you in selecting the exemptions that protect as much of your property as possible. Protect the property you have worked for by calling us, Hayward, Parker & O’Leary Esqs., at 845-343-6227 or contacting us online for your free consultation.