Asset Protection
One of the greatest benefits to filing for a chapter 7 bankruptcy in New York is that while you get the tremendous opportunity to literally erase your credit card debt and other types of unsecured debt, you can keep most, if not all, of your property. The following list provides just a few of the things you can keep if you file for bankruptcy.
How to Keep Your Home
If you are filing by yourself you can keep your house if there is $50,000 of equity or less in the property. If you are married and filing jointly, you can retain your home if you have $100,000 of equity in your home. For instance, if your home is worth $350,000 and you have a mortgage of $300,000, then you have $5,000 of equity in your home. You could file for bankruptcy and still keep your home – as long as you continue to pay the mortgage on that home.
If you had $60,000 in equity in your home, would you lose your home? Maybe but I would think not and here is why. Since only $50,000 of equity is protected, technically, the trustee in charge of your case could sell your home, pay you the $50,000 of equity in your hand and distribute the remaining $10,000 of equity to your creditors who will be discharged in your bankruptcy estate. However, it may not be worth it for the trustee to take over your house, sell your house, pay you, and distribute the money to your creditors. It may be too cost prohibitive given the little value there for the creditors.
How to Keep Your Car
You can keep up to $2400 of equity in one single car (each spouse gets $2400 exemption). For example, you have a car that is worth $10,000 and you have financing on it for $7,600 then that car is fully exempt and you can keep it even though you are filing for bankruptcy. If you had a car that was worth let’s say $4,000 and you owned it free and clear, then $1600 of that car would be unexempt and exposed to the trustee. However, the trustee would have to sell the car, pay you the $2400 exemption amount, and then pay the creditors what little is left over after all the transaction costs. So even though your asset is above the exemption amount, you may not lose your car.
How to Keep Your Personal Property
You can keep up to $5,000 of personal property. This includes things like household goods, furniture, refrigerator, TV, jewelry etc with nothing over $600. Again, the same rule applies if for some reason your asset is either above $600 or above the $5,000 aggregate limit.
How to Keep Your Retirement Account
Your 401Ks, IRAs, and other types of retirement accounts are basically exempt, unless you have over $1 Million dollars. Also, all tuition savings program for a designated beneficiary are exempt.
The exemption laws in bankruptcy are numerous and complex. There are many more exemptions that I have not listed. Please contact me for a free consultation and I will be happy to answer any questions that you have.