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EXEMPTIONS IN NY BANKRUPTCY

A consumer Debtor filing a Chapter 7 is distinguished from a business debtor in that they have certain rights in personal property that exempt that property from the satisfaction of a money judgment, or from sale and liquidation at the hands of a Chapter 7 trustee. Here they are:

your fresh start exemptions

CPLR 5205 (a) (1): All stoves kept for use in the debtors dwelling house and necessary fuel thereof for sixty days; one sewing machine with its appurtenances.

CPLR 5205 (a) (2): the family Bible, family pictures, and school books not exceeding $50.00 in value and kept and used as part of the family library.

CPLR 5205 (a) (3): a seat or pew occupied by the debtor in a place of public worship;

CPLR 5205 (a) (4): domestic animals with the necessary food for those animals for sixty days, provided that the total value of such animals and food does not exceed four hundred and fifty dollars in value.

         Note(1): You can use this provision to exempt the family dog and cat.

CPLR 5205 (a) (5): all wearing apparel, household furniture, one mechanical gas or electric stove, one radio receiver, one television set, crockery tableware and cooking utensils necessary for the judgment debtor and family.

    Note(1): often times a debtor has a radio receiver that is part of package of electronics. Whether or not the entire stereo is exempt depends on whether or not it is divisible into components.

    Note(2): bankruptcy debtors often own computers, and other electronics that are not defined above as exempt. The practical difficulties in liquidating these things will most times result in the bankruptcy trustee abandoning the bankruptcy estates interest in these properties. A chapter 7 trustee has various options in dealing with this situation. Rather than liquidating them, he can demand that you  re-purchase the non-exempt items from the bankruptcy estate. Whether the trustee does so is a discretionary decision that takes into consideration the equities of your case.

CPLR 5205 (a) (6): A wedding ring, a watch not exceeding $35.00 in value:

CPLR 5205 (a) (7): Working tools and tools of a trade not exceeding $600.00 in value.

CPLR 5205 (B): A cause of action against to recover money damages for taking or injuring exempt personal property.

       Note(1): This situation rarely arises, however if someone damaged or stole your exempt stereo and you obtained a judgment against the wrongdoer, you could exempt your right to receive or collect that judgment.

CPLR 5205 (C) Any property while held in trust for a judgment debtor, where the trust has been created by, or the fund so held in trust has proceeded from , a person other than the judgment debtor, is exempt from application to the satisfaction of a money judgment.

       Note (1): This section may be used to exempt retirement benefits and employer created stock and profit sharing plans. However you cannot intentionally create trust funds out of non-exempt property, because the original source of the property came from you rather than a third party. Also beware of bankruptcy provisions allowing the recovery of  transfers of property within up to six years prior to the filing of a case.

CPLR 5205 (D):  Income exemption; 90% of the income earned by a judgment debtor within 60 days prior to the filing of a bankruptcy case.

       Note (1): If you have $3500 in a bank account and $1,000.00 was traceable to deposits from your paycheck within 60 days prior to the filing, you could exempt $900.00 from the reach of the bankruptcy trustee.

CPLR 5205(E): Exemptions to members of the armed forces. The pay or bounty of an of a non-commissioned officer, musician or private in the armed force of the US or New York State is exempt from the satisfaction of a money judgment.

CPLR 5205 (F) Exemption for unpaid milk proceeds. (90% of accounts receivable for the sale of milk)

CPLR 5205 (G): Security deposit exemption. (Money deposited as security for rental property is exempt)

CPLR 5205 (H): Health aids: any medical or dental accessories including guide dogs are exempt from the satisfaction of a money judgment.

CPLR 5205 (i): The right of a judgment debtor to accelerate payment of a death benefit or special surrender value under a life insurance policy.

CPLR 5206 (A) Exemption of homestead; property of one of the following types, not exceeding $50,000.00 in value above liens and encumbrances, owned and occupied as a principle residence is exempt from the application of the satisfaction of a money judgment, unless the judgment was recovered wholly for the purchase price thereof.

     1. a lot of land with a dwelling thereon,

       2. share of stock in a cooperative apartment corporation,

       3. units of a condominium apartment, or

       4. a mobile home.

But no homestead shall be exempt from taxation or from sale for nonpayment of taxes or assessments.

          Note(1) The essential aspect of the homestead exemption is the term "owned and occupied ". Often times people give homes to family members and a deed is never formerly  transferred or recorded, resulting in the ownership of a former homestead that is not "occupied" by the judgment debtor as a principle residence. When the debtor file for bankruptcy, the homestead exemption does not apply and the debtors former residence is liquidated to pay his debts.

         Note (2) The homestead exemption is specifically declared invalid as against unpaid property taxes. Property taxes will remain as a forecloses able lien against property  in a chapter 7 case regardless of the bankruptcy discharge.

        Note (3) The homestead exemption is invalid as against  foreclosure judgments in a chapter 7 case as these are judgments "wholly to recover the purchase price thereof". This also applies to home equity loans as interpreted by Bankruptcy Courts in this jurisdiction as the home equity loan also involves a closing on property. (But see: "zero dollars down" for information on how you may be able to avoid a home equity mortgage in a chapter 13 case, and how you can also stop a mortgage foreclosure in a chapter 13 case.)

New York Debtor and Creditor Law 282:

      1. Bankruptcy exemption of a motor vehicle. One motor vehicle not exceeding $2,400.00 in value above liens and encumbrances of the debtor.

      Note(1); In a joint case you can double this exemption to $4800.00 subject to the limitation that the property is jointly owned and jointly titled in the name of husband and wife. You cannot however aggregate or split exemptions. If husband owns a vehicle titled in his name alone worth $4,000.00 and wife owns a vehicle titled in her name alone worth $800.00, the $1,600.00 portion of husbands vehicle above $2,400.00 is non-exempt and the vehicle may be taken and sold to pay joint debts.

      2. Bankruptcy exemption for right to receive benefits. The debtors right to receive or the debtors interest in:

      (a) a social security benefit, unemployment compensation, or a local public assistance benefit;

      (b) a veteran's benefit;

      (c) a disability, illness or unemployment benefit;

      (d) alimony, support or separate maintenance to the extent reasonable necessary for the support of the debtor;

      (e) all payments under employer created pension and profit sharing plans based on age or length of service;

      3. Bankruptcy exemption for the right to receive certain property;

      (i) an award under a crime victim's reparation law;

      (ii) a payment on account of the wrongful death of an individual for whom the debtor was dependant to the extent reasonably necessary for the support of the debtor or debtors dependants;

      (iii) a payment not to exceed $7500 in value on account of personal bodily injury, not including pain and suffering or compensation for actual pecuniary loss, of the debtor or an individual of whom the debtor was a dependant.

      Note(1): This exemption applies to general damages which do not need to be specifically plead in a personal injury case. (See Personal Injury) These are damages for lost wages. Specially plead damages are damages for property loss (pecuniary) and pain and suffering which are not exempt.

      (iv) a payment in compensation of loss of future earnings of the debtor or an individual or whom the debtor is or was dependant, to the extent reasonably necessary for the support of the debtor and any dependant of the debtor.

      Note (1): This clearly exempts workers compensation benefits. It also includes a structured personal injury recovery for loss of future earnings above and beyond $7,500.00

New York Debtor and Creditor Law 283: Aggregate individual bankruptcy exemptions for certain annuities and personal property

      1. General application. The aggregate amount the debtor may exempt from the property of the estate for personal property exempt from the application to the satisfaction of a money judgment under subdivision (a) of section 5205 of the CPLR and for benefits, rights, privileges, and options of annuity contracts shall not exceed $5,000.00.

      Note (1): This amount may be doubled to $10,000.00 in a husband and wife filing.

      2. Contingent alternative bankruptcy exemption. a debtor who does not claim a homestead exemption and who does not reach the aggregate limit of $5,000,00 in other exemptions under CPLR 5205(a) may exempt cash, including the right to receive a tax refund in the amount of $5,000.00 minus the total value of  CPLR 5205 (a) exemptions, or $2,500.00 whichever is less.

      Note(1): This section is designed primarily to benefit non-homeowner debtors

      Example: a debtor has $11,000.00 in a bank account. $7,500.00 was recently deposited from a personal injury settlement, $2,500.00 from a tax refund, and $1,000.00 from earnings from wages within the last 60 days. Trustee argues that he is entitled to all but $2,500.00 the amount of the tax refund on the grounds that the wages and the personal injury settlement once deposited have lost there standing as exempt property and are now "cash".

      Most court will overrule the trustees motions and to turn over the bank account as the exemptions are traceable to an exempt source. Several years ago I represented a debtor under this exact case scenario, and client kept the $11,000.00 bank account. In actuality there was $100.00 in non-exempt property relating to 10% of the $1,000.00 deposit from wages, however the trustee abandoned the point  when he lost on the primary issue.

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