Like all states, New York has a set of exemptions you can use to protect property when filing for bankruptcy, such as a home, car, and retirement account. In this article, you'll learn:
If you have more questions, read How Does New York Bankruptcy Work? Not only will you find answers, but it includes helpful checklists and a link to an interactive bankruptcy quiz. Or, try the start-to-finish bankruptcy guide, What You Need to Know to File for Bankruptcy in 2021.
You can protect property covered by an exemption regardless of whether you file for Chapter 7 or 13. But each chapter treats nonexempt property—things not covered by an exemption—differently.
The different approaches ensure that creditors receive the same amount regardless of the chapter filed.
You can file for bankruptcy in New York after living there for more than 180 days. However, you must live in New York much longer before using New York exemptions—at least 730 days before filing, to be exact. Otherwise, you'd use the previous state's exemptions.
But suppose you weren't living in any particular state during the two years before filing for bankruptcy. In that case, you'd use the exemptions of the state you lived in for most of the 180 days before the two-year period that immediately preceded your filing. (11 U.S.C. § 522(b)(3)(A).) Learn more about filing for bankruptcy after moving to a new state.
New York is one of the handfuls of states that let you choose between the state exemption list and the federal bankruptcy exemption scheme. You won't be able to select exemptions from each list—you must pick the system that will work best. If you choose the New York exemptions, you can also use the federal nonbankruptcy exemptions.
Here are some of the most commonly used New York exemptions. Keep in mind that married couples filing together in a joint bankruptcy can double most exemption amounts if both spouses have an ownership interest in the exempt 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:
(CPLR §§ 5206 (a), (d), and (e).) To learn more, see 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. (CPLR §§ 5205 (a)(8).)
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 if you don't use the homestead exemption. (CPLR §§ 5205 (a) (9).)
You can protect up to $11,975 of the following items under CPLR § 5205:
Qualified retirement accounts are exempt under the federal rules and can be used in every state, regardless of the exemption scheme used. For current amounts, see Your Retirement Plan in Bankruptcy.
If you don't exempt your property carefully, you could lose it. Answers to these common questions might help you steer clear of common issues.
Do I automatically get to keep exempt property? Generally, no. In most cases, you can exempt property needed to maintain a job and household, such as furnishings, clothing, and some vehicle equity. You'll select the New York exemption set that best protects your property, list your assets on Schedule C: The Property You Claim as Exempt, and file it along with other required paperwork.
Will someone check my exemptions? The bankruptcy trustee—the court-appointed official tasked with managing your case—will review Schedule C to ensure that you have the right to protect the claimed property. A trustee who disagrees with your exemptions will file an objection with the court. The judge will decide whether you can keep the property.
Example. Jeff owns a rare, classic car worth $15,000, but the state vehicle exemption won't adequately protect it. Believing that the car qualifies as art—at least in his mind—Jeff exempts it using his state's unlimited artwork exemption. The trustee reviews Schedule C, disagrees with Jeff's characterization, and files an objection with the court. After consideration, the judge will likely side with the trustee, determining that the vehicle doesn't qualify as a piece of art.
What if I make a mistake? Most trustees won't file an objection unless it's clear that the debtor is trying to pull something over on the court. At least not without trying to resolve the issue first. If there's a minor exemption problem, the trustee will likely call you to work out the issue informally.
It's worth noting that it's not a good idea to finesse exemptions. Not only do you have an obligation to supply correct information on your bankruptcy forms, purposefully making inaccurate statements could be considered fraudulent. Bankruptcy fraud is punishable by up to $250,000, 20 years in prison, or both.
Unless indicated otherwise, all references are to the New York Code Civil Practice Law and Rules (NYCPLR), and New York's laws on the New York State Senate website.
You should be aware that additional exemptions exist and New York's exemption amounts adjust every three years (the last adjustment occurred on April 1, 2021). While you can read the statutes on the New York State Senate website, you'll find the most recent figures on New York's Department of Financial Services website (search for "Exemption from Application to the Satisfaction of Money Judgments") or by consulting with a local bankruptcy lawyer.
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 nolo.com/legal-encyclopedia/bankruptcy.
This overview cannot provide all of the information you'll need to file a bankruptcy case. For more detailed information, consider buying a self-help book such as How to File Chapter 7 Bankruptcy by Attorney Cara O'Neill and Albin Renauer J.D.
Updated July 6, 2021