What Can I Keep if I File Bankruptcy?
When most people think of a liquidation bankruptcy like Chapter 7, they think of holding a fire sale where everything you own is up for grabs to creditors. This is not true. You can keep many of your possessions through a Chapter 7 bankruptcy. Below you can find a list of exempt property in Chapter 7 bankruptcy.
Chapter 7 Bankruptcy Exemptions
The term "exemptions" refers to the types of property that you are allowed to keep when you file for Chapter 7 Bankruptcy. States have the option of following either the Federal bankruptcy exemptions or their own. New York offers a choice between the Federal bankruptcy exemptions and its own New York bankruptcy exemptions. When you file bankruptcy, you must choose either the Federal exemptions or the New York exemptions. You cannot select some from one and some from the other. Your selection on which exemptions to use will depend upon your circumstances. For example, if you own a home, you would most likely choose the New York exemptions. Likewise, if you had life insurance with cash value, you would most likely select the New York bankruptcy exemptions. In most other situations, you would most likely the Federal bankruptcy exemptions. The decision on which exemptions are selected should be made by an experienced bankruptcy attorney.
Bankruptcy Exemptions
When you file a Chapter 7 Bankruptcy, the bankruptcy trustee, who represents the court, may take possession and sell your property to raise funds for your creditors. This sounds far harsher than it really is, because laws exempt specific items of your property from the trustee and allow you to keep them. As a result, in the vast majority of cases, there are no assets for the trustee to sell. The laws that protect your property are called bankruptcy exemptions.
The term "exemptions" refers to the types of property that you are allowed to keep when filing for Chapter 7 bankruptcy. States have the option to follow either the Federal exemptions or their own. New York offers a choice between the Federal bankruptcy exemptions and its own New York bankruptcy exemptions. When you file bankruptcy, you must choose either the Federal exemptions or the New York exemptions. You cannot select some from one and some from the other. The exemptions limits are periodically updated. If you are filing a joint bankruptcy with your spouse, you may double the amounts of either the New York or Federal exemptions.
New Jersey also allows people filing bankruptcy to choose either the New Jersey bankruptcy exemptions or the Federal bankruptcy exemptions. However, since the New Jersey bankruptcy exemptions are generally less generous than the Federal bankruptcy exemptions, most people filing bankruptcy in New Jersey select the Federal bankruptcy exemptions. Again, if you are married and filing bankruptcy together, you may double the Federal Bankruptcy exemptions.
Some of the more commonly used New York bankruptcy exemptions:
Homestead Exemption: covers your residence, provided that the residence is in New York, you have at least a partial ownership interest, and you reside in the residence. The amount of equity that you are allowed depends on the county in which you reside. The maximum exemption is $179,925, if you live in any of the following countries: Richmond, Kings, Queens, New York, Bronx, Nassau, Suffolk, Westchester, Rockland and Putnam. The maximum exemption is $149,975 if you live in any of the following countries: Dutchess, Orange, Ulster, Columbia, Albany and Saratoga. The maximum exemption is $89,975 for all other countries in New York State. The residence can be a house, condo, coop or mobile home. Please note that you only need to exempt your portion of the equity in the property. For example, if you are one of two people on the deed, you only need to exempt half of the equity in the home. If you use this Homestead exemption, you cannot also use the exemptions for cash, clothing, furnishings or the New York Wildcard Exemption discussed below.
Cash up to $6,000, which includes money in your bank accounts, cash in your possession. tax refunds, and U.S. Savings Bonds. Note, that the use of this exemption will reduce the amount you have under the following exemption for $11,975.
Clothing, Furnishings, Tools of the Trade up to $11,975. You are permitted to value these items based upon their current fair market value, which is the amount that a buyer would pay for each item on the open market, and not what you paid for the items. In most cases, $11,975 covers the value of these items. Within this exemption, the limit on the value of tools of the trade is $3,575. The total limit of $11,975 is reduced by the amount of cash that you are exempting in the $6,000 exemption listed above. For example, if you have $2,000 in cash, you can only exempt up to $9,975 in clothing and furnishings. This exemption is also only available if you are not using the New York Homestead Exemption.
The New York Wildcard Exemption allows you to use $1,175 for anything. This exemption is not available if you use the New York Homestead Exemption.
Retirement Plans and IRAs. Most retirement plans, such as 401(k) and 403(b), are fully exempt. An IRA funded by a roll-over from a qualified retirement plan is also exempt.
Car with up to $4,825 in equity. For example, if you own a car or other motor vehicle worth $15,550, and you owe $11,000 on the car loan, you are allowed to keep the car, since you have only $4,825 in equity. If the motor vehicle is equipped for a disabled person, then the exemption allowed is $11,975. If you are over the exemption may be required to pay that amount to the bankruptcy trustee in order to keep your car. If you don’t, your car may be sold and you would receive the allowed exemption amount.
Personal Injury Claim up to $9,000. If you have a claim for personal injury caused by another person's negligence, such as in the operation of an automobile or a defective condition that caused you to slip and fall, you are allowed to keep the first $9,000 received from such a claim. Your personal injury lawyer will also be permitted to receive his or her legal fee and expenses. The bankruptcy trustee is also entitled to a fee for dealing with your personal injury action. If there is money left over after your creditors, personal injury attorney and trustee are paid, in addition to the $9,000, you will also receive the remaining balance of the settlement or award. This exemption does not cover money received for pain and suffering or compensation for actual pecuniary loss. This means, if any of the settlement or award is labeled compensation for “pain and suffering” or for “pecuniary loss,” you would not be able to keep those amounts.
Disability Insurance: You may keep all money received as benefits from disability insurance.
Social Security: You may keep all money received from Social Security
Security Deposits: You may keep all money given for a security deposit, such as apartment rent security or for utilities.
Public Assistance: You may keep all money received for public assistance.
Life Insurance: You may keep all money received as benefits from life insurance.
Unemployment Insurance: You may keep all money received as benefits from unemployment insurance.
Veteran Benefits: You may keep all money received as veteran benefits.
Armed Forces: You may keep all wages earned from the armed forces of the United States.
Workers Compensation: You may keep all money received as benefits from workers’ compensation.
Spendthrift Trust: If the spendthrift trust was established by someone other than you, you may keep all the funds in the spendthrift trust.
If you are married and file a joint bankruptcy petition, the amount of each of these exemptions are doubled. The amounts of the above listed New York exemptions are adjusted every three years. The figures above are from the April, 2021 update. The next adjustment will take place on April 1, 2024.
Some of the more commonly used Federal Bankruptcy Exemptions
The Federal bankruptcy exemptions are updated every 3 years. The following reflects the update of April 1, 2023.
Homestead Exemption: $27,900 in equity for a home, condo, coop or mobile home, in which you have at least a partial ownership interest, which is located in New York, and you reside in. Please note that you only need to exempt your portion of the equity in the property. For example, if you are one of two people on the deed, you only need to exempt half of the equity in the home.
Wildcard Exemption: $13,950. You can use this for any type of asset. Please note that this exemption is only available if you or not using the Homestead Exemption or you have unused Homestead exemption available of $13,950.
Personal property up to $14,875. This category includes household possessions and clothing. The fair market value of each item is limited to $700.
Motor vehicle with up to $4,450 in equity. For example, if your car is worth $10,000 and you have a car loan of $5,550, your equity in the car would be $4,450, which is the limit of this exemption. If the amount of your equity exceeds the limit, you may also use the Wild Card Exemption, if it is available to you. If your equity in the motor vehicle exceeds both the motor vehicle and wild card exemptions, if using it, you may be required to pay that amount to the bankruptcy trustee in order to keep your car. If you don’t, your car may be sold and you would receive the allowed exemption amount.
Tools of the trade are exempt up to $2,800. This exemption covers tools or books that you use to earn a living. These items are valued at their current fair market value.
Jewelry is exempt up to $1,875.
'Qualified Retirement Accounts and Pensions Plans are exempt up to $1,512,350. This covers most common types of retirement accounts, such as 401K, 403B,414H, profit-sharing, SEP and simple IRAs, and defined benefit plans, IRAs and Roth IRAs·
Personal injury awards are exempt up to $27,900. If you have a claim for personal injury caused by another person's negligence, such as in the operation of an automobile or a defective condition that caused you to slip and fall, you are allowed to keep the first $27,900 received from such a claim. Your personal injury lawyer will also be permitted to receive his or her legal fee and expenses. The bankruptcy trustee is also entitled to a fee for dealing with your personal injury action. If there is money left over after your creditors, personal injury attorney and trustee are paid, in addition to the $27,900, you will also receive the remaining balance of the settlement or award. This exemption does not cover money received for pain and suffering or compensation for actual pecuniary loss. This means if any of the settlement or award is labeled compensation for “pain and suffering” or for “pecuniary loss” you would not be able to keep those amounts.·
Life Insurance up to $14,875. This applies to the loan value or interest you have in a life insurance policy.
Proceeds from a Life Insurance Policy: Life insurance proceeds you receive from a policy on the life of a person you depend upon and need for support are exempt.
Wrongful Death Recovery: The full amount recovered for the wrongful death of anyone that you depended upon is exempt.
Health Aids: Fully exempt
Public Assistance: You may keep all money received for public assistance.
Unemployment Insurance: You may keep all money received as benefits from unemployment insurance.
Veteran Benefits: You may keep all money received for veteran benefits.
Crime Victims Compensation: You may keep all payments received as crime victim’s compensation.
Workers Compensation: You may keep all money received as benefits from workers’ compensation.
Alimony and Child Support: Amounts received for both Alimony and Child Support that are needed for support are exempt.
If you are married and file a joint bankruptcy petition, the amount of each of these exemptions is doubled. The amounts of the above listed Federal exemptions are adjusted every three years. The next adjustment is scheduled for April 1, 2026.
If you have an asset that is not exempt in a Chapter 7 bankruptcy and you want to keep that asset, you should consider Chapter 13 bankruptcy for relief.