When filing for Chapter 7 bankruptcy in New York, you have the option to choose between federal bankruptcy exemptions and New York State exemptions, but you cannot mix and match. Each exemption system includes protections for various types of property, and the choice depends on which set of exemptions offers more favorable coverage based on your assets.
Under the federal exemption system, key protections include:
Homestead exemption — Protects up to $27,900 of equity in a primary residence (as of 2024). Married couples filing jointly may double this amount.
Vehicle exemption — Allows up to $4,450 in equity in one motor vehicle.
Household goods and furnishings — Exempts up to $700 per item, with a total limit of $14,875.
Jewelry — Protects up to $1,875 in jewelry.
Wildcard exemption — Provides up to $1,475 plus any unused portion of the homestead exemption, for a total potential exemption of $13,950 that can be applied to any property.
New York State exemptions, however, offer different and often more generous protections, particularly for homeowners. Some important New York exemptions include:
Homestead exemption — The amount of equity protected depends on the debtor’s county of residence. For example, in New York City and surrounding counties (Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Putnam, and Westchester), up to $179,950 of home equity is exempt per person. Married couples filing jointly may double this amount.
Motor vehicle exemption — Protects up to $4,825 of equity in one vehicle, or $11,975 if the car is equipped for a disabled person.
Clothing and household goods — Fully exempt without specific monetary limits for necessary items.
Tools of the trade — Protects up to $3,575 worth of tools used for work.
Money judgments — Up to $3,425 is exempt from enforcement of money judgments against the debtor.
Wildcard exemption — Protects up to $1,175 of any kind of property, plus up to $11,825 of any unused portion of your homestead exemption.
The homestead exemption is particularly significant for homeowners. It shields a portion of the equity in a primary residence from liquidation. Equity is the difference between the home’s market value and any outstanding mortgage or liens. For example, if a home in Brooklyn is worth $500,000 with a mortgage balance of $300,000, the homeowner’s equity is $200,000. If the debtor claims the New York homestead exemption of $179,950, only $20,050 remains potentially available to creditors.
If there is equity remaining beyond the homestead exemption, the bankruptcy trustee may sell the home to pay creditors. However, you are entitled to receive the exempted amount from the sale proceeds. If the remaining non-exempt equity is minimal, the trustee may decide not to sell the property, as the costs of sale and distribution may outweigh the benefit to creditors.
For New Yorkers navigating the complexities of Chapter 7 bankruptcy, choosing the right set of exemptions is vital. [nap_names id="FIRM-NAME-1"] PLLC in Brooklyn offers expert guidance to protect your assets so that you achieve the best possible outcome. Call [nap_phone id="LOCAL-CT-NUMBER-1"] or contact us online to schedule a free initial consultation.
]]>Despite the tailoring of a Chapter 13 plan to meet the debtor’s abilities, there can be unexpected financial circumstances that make it difficult to maintain payments. If you find yourself in this situation, it is important to understand your options and to act promptly to avoid severe consequences.
One remedy is requesting a payment deferral. If your financial difficulty is temporary, you may ask the Chapter 13 trustee to approve a short-term suspension of payments. This deferral can give you breathing room to recover from unforeseen setbacks, such as a medical emergency or temporary job loss. However, you must demonstrate good faith and provide a valid reason for the delay.
Another option is seeking a plan modification. You may request a change to reduce your monthly payment amount or extend the plan's duration, depending on your circumstances. Modifications require court approval and often involve showing evidence of a significant change in financial condition, such as a reduction in income or increase in necessary expenses.
If your financial situation worsens and making payments is no longer feasible, a hardship discharge may be granted. This is a court order releasing you from the remaining debts without completing all plan payments. However, this remedy is granted only under very limited conditions. You must show that the hardship is beyond your control, that modification is not practical and that creditors have already received payments equal to what they would have received under Chapter 7.
Alternatively, you may seek to convert your Chapter 13 case to a Chapter 7. This option is suitable if your financial situation has deteriorated to the point where liquidation of nonexempt assets is necessary to resolve your debts. Converting to Chapter 7 requires meeting eligibility requirements, including passing the means test.
If none of these options work, you might choose to request dismissal of your Chapter 13 case. Dismissal allows you to refile and to create a new repayment plan with different terms, potentially accommodating your new financial reality. However, refiling can have restrictions and implications, especially if your prior case was dismissed due to noncompliance.
Throughout this process, communication with your bankruptcy attorney is critical. The sooner you notify your attorney about difficulties making payments, the more options you will have. Your attorney can guide you through the legal steps and advocate for the best possible outcome.
The Law Office of Gregory Messer in Brooklyn, New York concentrates in bankruptcy law. With decades of experience, we provide personalized solutions to help you navigate financial challenges and find a path to stability. Call {PHONE) or contact us online to schedule a free initial consultation.
]]>Here are some proven ways to start rebuilding your credit score within the first year after bankruptcy:
Pay non-dischargeable debts on time — Debts that are not erased by bankruptcy include obligations like student loans, child support and certain tax delinquencies. Staying current on payments for these debts can help prevent further damage to your credit score. Making regular, timely payments will demonstrate financial responsibility and help to gradually rebuild your credit profile.
Obtain a secured credit card — This type of credit card requires a deposit that serves as collateral. That amount typically matches the card’s credit limit. Using the card responsibly and making all payments on time establishes a record of reliability. It shows lenders that you are committed to financial stability. Use only a portion of the available credit each month and pay off the balance in full.
Limit new credit applications — Building up creditworthiness is important, but applying for multiple credit cards or loans within a short period of time can be detrimental. Each time you apply for a loan or credit line, an inquiry appears on your report, and this can temporarily lower your credit score. Limit yourself to one new credit application every six months. This will give your credit score time to recover between applications and also allow you flexibility to manage the existing loans.
Consider taking out a credit-builder loan — These loans are offered by banks and credit unions to individuals who need help with building credit. The loan amount is typically small and is held in an account while you make payments. Once the amount is repaid, you receive the funds. The lender reports your on-time payments to the credit bureaus, which can significantly boost your credit score over time.
Monitor your credit reports — Your three-digit FICO score is determined from information listed on your credit reports. It is used by insurance companies, lenders and even employers as a measure of your creditworthiness. After bankruptcy, obtain copies of your credit reports from the three major credit bureaus — Experian, Equifax, and TransUnion — and review them for any inaccuracies, such as debt accounts that were discharged but are still being reported as active. If you find errors, dispute them promptly with the credit bureau. Monitoring your credit reports also allows you to track your credit score as it improves.
Rebuilding credit after bankruptcy requires patience, persistence and careful budgeting. An experienced bankruptcy attorney can suggest techniques for getting back on your feet financially.
The Law Office of Gregory M. Messer PLLC in Brooklyn can manage all aspects of your bankruptcy case and help you with ways to rebuild your credit score as soon as possible. Call {PHONE) or contact us online to schedule a free initial consultation.
]]>An individual debtor who wishes to discharge debts under Chapter 7 of the Bankruptcy Code must usually pass the means test. This device is intended to prevent people with higher incomes who could potentially repay a portion of their debts from misusing Chapter 7. Instead, these debtors must use Chapter 13. The means test thus can be a significant hurdle to overcome.
These include standard living expenses, such as:
As well as other costs, such as:
The standard living expenses that can be deducted may be predetermined based on schedules developed by the Internal Revenue Service (IRS). By deducting these allowable expenses from total income, the debtor calculates their disposable income. Provided the disposable income remains beneath a designated limit, the debtor successfully satisfies the means test and can proceed with Chapter 7 bankruptcy.
If your income and expenses prevent you from passing the means test, you cannot file for Chapter 7 bankruptcy. The court will likely dismiss your Chapter 7 case, or the assigned U.S. Trustee may file a motion to dismiss it based on a presumption of abuse. This occurs because the test indicates you have enough disposable income to repay part of what you owe.
Failing the test does not leave you without options. You may convert your case to a Chapter 13 bankruptcy. Under Chapter 13, you propose a repayment plan to pay back some or all of your debt over three to five years. This process allows you to restructure your finances under court protection without liquidating your assets.
Certain debtors are exempt from the means test. For example, if more than half of the debtor's debts are business-related rather than consumer-related, they do not have to complete the means test. Additionally, if the debtor is a disabled veteran and incurred most of their debt while on active duty, they are also exempt from the test.
In some cases, delaying the bankruptcy filing can be beneficial. If a debtor has experienced a recent drop in income, waiting a few months may lower their average monthly income, potentially bringing it below the state median and allowing them to pass the means test without needing to proceed to the second stage.
The means test is a critical but complex part of the Chapter 7 process. An experienced Chapter 7 bankruptcy attorney can be of great assistance in helping you meet the test or in suggesting alternative plans.
The second part of the means test allows you to subtract certain living expenses from your income to determine if you have enough disposable income to repay creditors. These deductions combine your actual expenses with standardized amounts based on IRS guidelines for your geographic area. You must properly identify all allowable deductions to pass the test.
Allowable deductions on the means test often include the following:
An attorney can help ensure you claim every allowable deduction.
No, you generally do not have to complete the means test if business debts, rather than consumer debts, make up the majority of your total debts. This major exception provides a direct path to Chapter 7 relief for small business owners and individuals with significant business obligations.
To qualify for this exemption, business-related debts must make up more than 50% of your total liabilities. You incur consumer debt for a personal, family, or household purpose, such as credit card charges for groceries or a personal car loan. You incur business debt with a profit motive in mind. You must accurately categorize each debt to determine if you meet this threshold and can bypass the means test.
The [nap_names id="FIRM-NAME-1"] in Brooklyn can review your debt situation and advise you about meeting the Chapter 7 means test. Call [nap_phone id="LOCAL-CT-NUMBER-1"] or contact us online to schedule a free initial consultation.
]]>One of the most powerful features of Chapter 13 is the automatic stay that takes effect immediately upon filing a petition. This court order puts a halt on all collection efforts by your creditors, including your mortgage lender. Foreclosure proceedings will be paused, giving you the opportunity to develop a strategy for financial recovery.
The core of Chapter 13 is a court-approved plan that calls for repayment of a portion of your unsecured debt over a three- or five-year period. This plan allows you to do the following:
Catch up on missed mortgage payments — The plan incorporates your past-due mortgage payments and spreads them out over the course of the repayment period. This allows you to gt back on track and eliminate the mortgage delinquency, thereby saving your home.
Resume current mortgage payments — You must keep up your ongoing monthly mortgage payments on time while adhering to the plan. Missing these payments can result in the automatic stay being lifted and foreclosure proceedings resuming.
Reduce other debts — The Chapter 13 plan pays down most of your unsecured debts, like credit card balances, which frees up income to devote to secured debt like your mortgage and car loan.
Note that your Chapter 13 plan will require paying back your mortgage lender for the nonexempt equity in your home. This means any equity value not covered by the applicable homestead exemption.
The automatic stay remains in effect throughout the plan’s duration as long as you make all required payments on time. Upon completion of the plan, your remaining unsecured debt is discharged.
However, not everyone qualifies for Chapter 13 bankruptcy. The individual's total debt must fall below a certain threshold set by law. Additionally, the debtor must have sufficient disposable income, after meeting basic monthly expenses, to make the required payments under the plan.
A skilled New York bankruptcy attorney can assess your financial situation, determine if Chapter 13 is the right course of action for you and guide you through the process. Your attorney can also help you create a realistic and achievable repayment plan that maximizes your chances of successful completion and retention of your home.
The Law Office of Gregory M. Messer PLLC in Brooklyn has decades of experience helping New York debtors protect their homes through Chapter 13 bankruptcy. Call [nap_phone id="LOCAL-CT-NUMBER-1"] or contact us online to schedule a free initial consultation and discuss your situation in detail.
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