New York: New Bankruptcy Exemptions
by Karen Sheehan
Former New York Governor David Paterson recently signed a bill that changes the exemptions in chapter 7 and 13 bankruptcy cases in New York State. The new bankruptcy exemptions are effective January 22, 2011.
Below is a summary of the most important changes likely to affect creditors:
1. Increases the homestead exemption from $50,000 to $150,000 for the counties of Kings, Queens, Bronx, Richmond, Rockland, Westchester and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for all other counties.
2. Increases the motor vehicle exemption from $2,400 to $4,000 for one motor vehicle. If the vehicle is equipped for a disabled person, the exemption is $10,000.
3. Adds a new section permitting debtors to choose either the current federal exemptions or the New York State exemptions.
These changes are favorably received by local debtors’ counsel. Debtors, who would normally not qualify for a chapter 7 bankruptcy case because they had too much equity in their homes, now may be able to retain their homes while discharging their consumer debt. For example, a husband and wife living in New York City may pool their exemptions and protect $300,000 worth of equity in their home. Additionally, new chapter 13 debtors will be required to repay less debt through the chapter 13 plan, while existing chapter 13 debtors may be able to convert to a chapter 7 case, thereby eliminating further plan payments altogether.
The takeaway for creditors is that they may expect to see an increase in the quantity of chapter 7 petitions, and a decrease in the number of chapter 13 petitions, filed in New York. Further, creditors performing an equity analysis should take the increased exemptions into consideration when determining if there is any equity in the asset.
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