Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to a job loss, illness, or another event in New York, bankruptcy can help. Here, you'll find an explanation of Chapters 7 and 13, checklists to help you understand the process and stay organized, and New York's property exemption laws and filing information.
Because we couldn't include everything in one article, you'll want to check out its companion, What You Need to Know to File for Bankruptcy. You'll find lots more details there.
In most respects, filing for bankruptcy in New York isn't different from filing in another state. The bankruptcy process falls under federal law, not New York state law, and works by unwinding the contracts between you and your creditors. That's what gives you a fresh start.
But New York's laws come into play in a significant way because they determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after reviewing some basics.
Most people file either Chapter 7 or Chapter 13, and you're not alone if you don't know how the two differ. The short explanation below and our handy Chapter 7 versus 13 chart will help clarify things.
Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick, taking only a few months to complete. And it's cheap. You don't pay anything to creditors.
Chapter 7 bankruptcy works well for people who own mainly the essential items needed to live and work and not much else. People with more assets could lose them in Chapter 7 because the Chapter 7 trustee, the official responsible for the case, sells unnecessary luxury items and distributes the proceeds to creditors. For instance, you might have to give up your RV, baseball card collection, or timeshare in the Bahamas, even your house or vehicle if you have more equity than you're allowed to keep.
Also, unlike Chapter 13, Chapter 7 has no payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind on the loan when you file.
Chapter 13 involves repaying creditors some or all of what's owed using a three- to five-year repayment plan. Chapter 13 filers keep everything they own, and the payment plan provides ways to improve sticky financial situations.
For instance, you can catch up on late payments and save your home from foreclosure or your car from repossession. Also, if you need time to repay a debt you can't eliminate or "discharge" in bankruptcy, you can use Chapter 13 to force a creditor into a payment plan and repay your balance over time. Learn more about when filing for Chapter 13 is better than Chapter 7.
The biggest downside to this chapter? It can be expensive. Many people can't afford the monthly payment. Also, businesses can't file a Chapter 13 case. If you're a business owner, it's a good idea to learn about the ins and outs of small business bankruptcies before choosing the bankruptcy right for you.
Bankruptcy wipes out many bills, like credit card balances, overdue utility payments, medical bills, personal loans, and more. You can even get rid of a mortgage or car payment if you're willing to give up the house or car that secures the debt. (Putting property up as collateral creates a "secured debt." If you don't pay what you owe, the lender recovers the property.)
But you can't discharge all debts. You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worthwhile.
For instance, nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy. Also, student loans aren't easy to wipe out because you'd have to win a separate lawsuit (however, in 2023, steps have been taken to ease the student loan discharge process with a new student loan bankruptcy form).
Learn more about student loans in bankruptcy.
You won't be surprised to learn that qualifying for bankruptcy involves meeting several requirements. Because you're only entitled to a discharge every few years, if you've filed before, you'll want to check whether enough time has passed to allow you to file again. The waiting period varies depending on the chapter previously filed and the chapter you plan to file. Learn more about multiple bankruptcy filings.
You'll also need to meet specific chapter requirements. Here are the qualification basics for Chapters 7 and 13.
You'll qualify for Chapter 7 bankruptcy if your family's gross income is lower than the median income for the same size family in your state. Add all gross income earned during the last six months and multiply it by two. Compare the figure to the income charts on the U.S. Trustee's website (select "Means Testing Information").
Want an easy way to do this online? Use the Quick Median Income Test. If you make too much, you still might qualify after taking the second part of the "means test." If, after subtracting expenses, you don't have enough remaining to pay into a Chapter 13 plan, you'll qualify for Chapter 7.
Qualifying for Chapter 13 can be expensive because the extra benefits come at a hefty price, and many people can't afford the monthly payment. To qualify, you'll pay the larger of:
Find out more about calculating a Chapter 13 bankruptcy payment.
You won't lose everything in bankruptcy. You'll use bankruptcy exemption laws to protect your property. We list the significant exemptions below, but first, understanding the following will help you maximize what you'll keep in your case.
Here are some commonly used New York bankruptcy exemptions. Keep in mind that spouses who file together in New York can double the exemption amount in each category as long as both spouses have an ownership interest in the property.
A debtor can protect the equity in a house, condominium, co-op, or mobile home used as a residence up to the following values:
(NYCPLR §§ 5206 (a), (d), and (e).) Learn more about the New York homestead exemption.
A filer can exempt the equity in one motor vehicle up to $4,825 in value or up to $11,975 if the vehicle is equipped for use by a disabled debtor.
If you have more vehicle equity than you can exempt, and you don't use the homestead exemption, you can add the wildcard exemption and protect an additional amount. (NYCPLR §§ 5205 (a)(8).) Find out how the motor vehicle exemption works in a Chapter 7 case.
Exemptions protect necessary items that you'll need to work and live. The New York wildcard exemption allows you to protect any personal property of your choice (not real estate) or cash up to a value of $1,175. This exemption is available only if you don't use the homestead exemption. (NYCPLR §§ 5205 (a) (9).)
Many more exemptions exist—here's where you'll find a more detailed list of New York bankruptcy exemptions.
New York's exemption amounts adjust every three years (figures reflect the April 1, 2021 changes). Although you'll find New York's laws on the New York State Senate website, amount changes won't appear in the statute. Go to New York's Department of Financial Services website and search for "Exemption from Application to the Satisfaction of Money Judgments."
You can file for bankruptcy in New York after living there for over 180 days. However, you must live in New York for at least 730 days before filing. Otherwise, you'd use the previous state's exemptions.
If you lived in multiple states during the two years before filing for bankruptcy, you'd use the exemptions of the state you lived in for most of the 180 days before the two years immediately preceding your filing. (11 U.S.C. § 522(b)(3)(A).)
Also, to claim the total value of the homestead exemption, you must have purchased and owned the property for at least 1,215 days before the bankruptcy filing. If you can't meet this requirement, your homestead exemption is limited by federal law to $189,050 for cases filed between April 1, 2022, and March 31, 2025.
Learn more about filing for bankruptcy after moving to a new state.
Exempt your property carefully. The bankruptcy trustee, the court-appointed official assigned to manage your case, will review the exemptions. A trustee who disagrees with your exemptions will likely try to resolve the issue informally. If unsuccessful, the trustee will file an objection with the bankruptcy court, and the judge will decide whether you can keep the property.
Example. Mason owns a rare, classic car worth $15,000, but the state vehicle exemption doesn't cover it entirely. Believing that the car qualifies as art, at least in his mind, Mason exempts it using his state's unlimited artwork exemption. The trustee disagrees with Mason's characterization and files an objection with the court. The judge will likely decide the vehicle doesn't qualify as art.
Purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:
You can expect creditors to call until you file. It's usually best to ignore them because telling creditors about your bankruptcy can encourage them to take more drastic collection steps before losing the right to collect altogether. However, if you hire counsel and refer creditors to your lawyer, they'll have to stop calling you.
You'll complete the steps listed below in "What Steps Are Involved in a New York Bankruptcy?" But not everyone should file their own bankruptcy case.
The best candidate is a Chapter 7 debtor who meets qualification requirements, can eliminate all debts, and can protect all property with bankruptcy exemptions. People filing for Chapter 13 or Chapter 7 filers with complicated cases should seek representation.
Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about bankruptcy. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?
All filers pay a $338 filing fee in Chapter 7 unless the court grants a fee waiver and a $313 filing fee in Chapter 13 (amounts current as of August 2023). You'll also pay approximately $50 to $75 for credit counseling and debt management courses.
If you hire a bankruptcy lawyer to represent you, you can expect to pay from $1,500 to $2,500 upfront for most Chapter 7 cases, although the price will depend on the going rates in your area and case complexity. Chapter 13 legal fees run about $1,000 to $1,500 more, but you can pay them in installments through the Chapter 13 payment plan.
Learn about your options if you can't afford to hire a bankruptcy attorney.
We all know that seeing the forest helps us recognize the trees. Similarly, understanding the significant steps you'll take during your bankruptcy journey. will help you understand the bankruptcy process. Think of this checklist as a roadmap, but you can also use it to track your progress.
Once you decide to file, the fun begins! Well, not really. You'll start by gathering your financial information, which can take time. But our bankruptcy document checklist should help you organize what you or your attorney will need.
Your case starts when you file your paperwork with the local bankruptcy court. New York has three federal judicial districts—the Northern, Eastern, and Southern Districts of New York. Each district has a bankruptcy court with several divisions.
To determine which division has jurisdiction over your case, use the Federal Court Finder page. Click "Bankruptcy" in the drop-down box, then enter your location information. You can also reach a court clerk at one of the phone numbers listed below.
On each court's website (links below), you'll find instructions for filing your paperwork and other information you'll need, like the court's local rules. Click on "For Debtors" or "Filing Without an Attorney."
James T. Foley Courthouse
Alexander Pirnie Federal Building
James Hanley Federal Building
Conrad B. Duberstein U.S. Courthouse
Alfonse M. D'Amato U.S. Courthouse
U.S. Bankruptcy Court
U.S. Bankruptcy Court
U.S. Bankruptcy Court
Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:
These things must happen before you get a Chapter 7 bankruptcy discharge. Chapter 13 filers will also attend a repayment plan confirmation hearing and complete the three- to five-year payment plan.
Did you know Nolo has made the law easy for over fifty years? It's true, and we want to ensure you find what you need. Below you'll find more articles explaining how bankruptcy works. And don't forget that our bankruptcy homepage is the best place to start if you have other questions!
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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.
Updated August 24, 2023