In most respects, filing for bankruptcy in New York isn’t any different than filing in another state. The bankruptcy process falls under federal law in New York.
Table of Contents
- How Bankruptcy Works in New York
- Choosing the Right Bankruptcy Chapter For You in New York
- Will Filing Bankruptcy in New York Erase My Debts?
- Steps in a New York Bankruptcy: Bankruptcy Steps Checklist
- Protecting Property When Filing Bankruptcy in New York
- New York Bankruptcy Exemptions
- Preventing Bankruptcy Exemption Problems
- Qualifying for Bankruptcy in New York
- Hiring a Bankruptcy Lawyer in New York
- Bankruptcy Document Checklist
- After Filing for Bankruptcy in New York
Facing financial challenges is a part of life. But if you're one of the millions struggling financially due to COVID-19 or another event, bankruptcy can help. Here, you'll find:
- an explanation about Chapters 7 and 13
- checklists to help you understand the process and stay organized
- New York's property exemption laws and filing information, and
- links to our bankruptcy quiz, an online qualifying tool, and other helpful resources.
However, we couldn't squeeze everything into this article, so be sure to check out its companion What You Need to Know to File for Bankruptcy—you'll find lots more details there.
How Bankruptcy Works in New York
In most respects, filing for bankruptcy in New York isn't any different than filing in another state. The bankruptcy process falls under federal law, not New York state law, and it 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, too, in a significant way. They determine the property you can keep in your bankruptcy case. You'll also need to know other filing information, which we explain after going over some basics.
Choosing the Right Bankruptcy Chapter For You in New York
Most people file either Chapter 7 or Chapter 13. If you don't know the differences between the two, you're not alone. The short explanation below and our handy Chapter 7 versus 13 chart will help clear things up.
Chapter 7 bankruptcy. Chapter 7 is often a bankruptcy filer's first choice for several reasons. It's quick—it only takes a few months to complete. And it's cheap—you don't pay anything to creditors. It works well for those of us whose property consists of the essential items needed to live and work.
People with more assets could lose them, however, especially if they own unnecessary luxury items. 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 too much equity in it or you're behind on the payments. Unlike Chapter 13, Chapter 7 doesn't have a payment plan option for catching up on late mortgage or car payments. So you could lose your home or car if you're behind when you file.
Chapter 13 bankruptcy. By contrast, Chapter 13 filers must pay creditors some or all of what they owe using a three- to five-year repayment plan. But the payment plan allows Chapter 13 to offer benefits not available in Chapter 7. For instance, not only do you keep all of your property, but you can save your home from foreclosure or your car from repossession. If you need time to repay a debt you can't discharge in bankruptcy, you can use this chapter to force a creditor into a payment plan. The biggest downside to this chapter? It can be expensive. Many people can't afford the monthly payment. Learn more about when filing Chapter 13 is better than Chapter 7.
Caution for businesspeople. Be sure to learn about the ins and outs of small business bankruptcies. The principles discussed apply to consumers only.
Will Filing Bankruptcy in New York Erase My Debts?
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 gets to take the property back.)
But you can't discharge all debts. Nondischargeable debts, like domestic support arrearages and recent tax debt, won't go away in bankruptcy, and student loans aren't easy to wipe out (you'd have to win a separate lawsuit). You'll want to be sure that bankruptcy will discharge (get rid of) enough bills to make it worth your while.
Steps in a New York Bankruptcy
We all know that seeing the forest helps us recognize the trees, so it's probably a good time to consider the significant steps you'll take during your bankruptcy journey. Think of this checklist as a roadmap of sorts, but you can also use it to track your progress. The good news? You've already made headway on the first two items!
Bankruptcy Steps Checklist
Keeping Property When Filing Bankruptcy in New York
You won't lose everything in bankruptcy. You'll use your state 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.
- Exempt and nonexempt property. You can keep property protected by an exemption or "exempt" property. When a bankruptcy exemption doesn't cover the property, you'll either lose it in Chapter 7 or have to pay for it in the Chapter 13 repayment plan.
- Choosing state or federal exemptions. Unlike most states, New York allows you to choose between the state exemption list and the list of federal bankruptcy exemptions. If you use New York's exemptions, you can use the federal nonbankruptcy exemptions.
- Doubling exemptions. Spouses filing together can double the exemption amount if both own the property unless noted otherwise.
- COVID-19 recovery rebate exemption. You might be able to protect stimulus payments, tax credits, and child credits in bankruptcy with the federal recovery rebate exemption.
- Retirement accounts all filers can protect. You can keep your tax-exempt retirement accounts, including 401(K)s, 403(b)s, profit-sharing and money purchase plans, SEP and SIMPLE IRAs, and defined benefit plans and traditional and Roth IRAs to $1,362,800 per person (as of June 2021). (11 U.S.C. 522(b)(3)(C); (n).) Learn more about retirement accounts in bankruptcy.
New York Bankruptcy Exemptions
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.
New York Homestead Exemption
A debtor can protect the equity in a house, condominium, co-op, or mobile home used as a residence up to the following values:
- $179,950 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and, Putnam counties.
- $149,975 in Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties, and
- $89,975 in remaining counties.
(NYCPLR §§ 5206 (a), (d), and (e).) Learn more about the New York homestead exemption.
New York Motor Vehicle 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.
New York Wildcard Exemption
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).)
Other Bankruptcy Exemptions in New York
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."
Preventing Bankruptcy Exemption Problems
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.
Qualifying for Bankruptcy in New York
If you've never filed for bankruptcy before, you'll meet the initial requirement. Otherwise, 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. Find out how long you'll need to wait if your situation involves multiple bankruptcy filings.
You'll also need to meet specific chapter qualifications.
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 find that 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 an expensive proposition 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:
- your priority nondischargeable debt
- the value of nonexempt property, or
- your disposable income.
Find out more about calculating a Chapter 13 bankruptcy payment.
Hiring a Bankruptcy Lawyer in New York
Most people find it worthwhile to get counsel. A bankruptcy attorney will help you:
- qualify for the chapter of your choice
- determine when it's time to file
- help you keep the property you want
- make sure you don't run afoul of fraud or other issues, and
- explain when you can stop paying the bills you'll erase in your case.
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.
Are you curious whether your case is simple enough to file yourself? Our quiz will help you identify potential complications while educating you about the bankruptcy process. You'll find it here: Do I Need a Lawyer to File for Bankruptcy?
Filing Your Bankruptcy in New York
Now that you've decided to file, the fun begins! Well, not really. The first step—gathering your financial information—can be a bit of a chore. But using our bankruptcy document checklist should help you organize the things you (or your attorney) will need.
Bankruptcy Document Checklist
Bankruptcy Forms, Means Test Multipliers, and Course Providers
After assembling the documents, your next step will be to prepare the paperwork. Here's what you'll need and where to find it.
- Bankruptcy forms. You'll find free downloadable bankruptcy forms on the U.S. Courts website.
- Means test multipliers. Go to the bankruptcy trustee's webpage to get the figures needed to complete the means test.
- Education providers. The bankruptcy trustee's website also lists approved counseling providers. (Individuals must complete credit counseling during the 180 days before filing for bankruptcy and a debt management course after filing the bankruptcy case.)
New York Bankruptcy Court Locations
Your case starts when you file your paperwork with the local bankruptcy court and either pay the filing fee or request a fee waiver. The state of 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 on "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 Suite 1595 Alfonse M. D'Amato U.S. Courthouse |
U.S. Bankruptcy Court U.S. Bankruptcy Court U.S. Bankruptcy Court |
After Filing for Bankruptcy in New York
Your creditors will stop bothering you soon after you file. It takes a few days because the court mails your creditors the notice of the "automatic stay" order that prevents most creditors from continuing to ask you to pay them. Here's what will happen next:
- You'll turn over financial documents proving the statements in your bankruptcy paperwork.
- You'll attend the 341 meeting of creditors—the one appearance all filers must attend.
- You'll complete a debtor education course and file the completion certificate.
These things all 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.
Need More Help?
You might not know this, but Nolo has been making the law easy for DIYers for over fifty years. If you have questions, use the links we've included throughout for more details. Otherwise, you'll find the answers to almost all of your bankruptcy questions at www.nolo.com/legal-encyclopedia/bankruptcy.
Providing all information needed to file for bankruptcy is beyond the scope of this article. If you'd like to file without an attorney, consider buying a self-help book like How to File Chapter 7 Bankruptcy by Attorney Cara O'Neill and Albin Renauer J.D. to help you make well-informed decisions about your bankruptcy matter.
Updated July 6, 2021
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