NY Bankruptcy Exemptions Let You Keep All Your Stuff… Seriously

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Telling Tips is a series of articles from local experts to help you save money, make better decisions and plan for a better future.

Governor Paterson was one of the greatest governors in this state’s history. What’s that? I’m insane? Okay, fine. But here’s the thing: the last bill that Governor Paterson signed into law before leaving his post was a windfall to debtors that want to file bankruptcy and keep their stuff. Perhaps the most radical change to the bankruptcy laws since 2005, this bill has, and will continue to, change the way that people across New York, and especially Sheepshead Bay, will approach the topic of Bankruptcy for some time to come.

The first thing I’d like to discuss is how this new bill affects those who own homes, co-ops or condos in Brooklyn. Prior to this new bill being passed, a debtor who was filing for bankruptcy was able to keep up to $50,000 worth of equity in their home and still keep the property.  In other words, if you owned a co-op on Avenue X, and your mortgage was $250,000 and the co-op appraised at $300,000, the Bankruptcy Court could not take that home away from you and you’d still be able to wipe out your debts (the difference between your mortgage and the value of the home is your “equity”).  However, lets say that co-op was really worth $330,000.  The trustee (the individual who proceeds over the case) would likely take the co-op and sell it to repay your creditors, because you had $30,000 over what you were allowed under the old bankruptcy law.

Not anymore.

The new bankruptcy exemptions, which went into effect in January of this year, allow you to exempt up to $150,000 in equity as a single filer. If you and your spouse are filing together, and both names are on the deed or shares, you get to exempt up to $300,000 in equity. That’s a lot. Seriously. You know anyone with over $300,000 in equity in their homes?  Me neither. But I do know a ton of people with more than $50,000 or $100,000 in equity in their homes. That, specifically, is who this bill helps the most.

Let me give you a scenario here. You’re deep in credit card debt.  $80,000 deep.   To make things even worse, you own your co-op outright, but you can’t refinance or get a loan because your bank doesn’t like your credit score. You think you’re stuck and don’t know what to do.

Prior to January of 2011, if that co-op was worth more than $50,000, you’d likely lose it if you filed for Chapter 7 Bankruptcy in New York.  Not anymore. Now, you’ve got up to $150,000 in equity that you can exempt. And $300,000 if you file with your husband and/or wife and their names are on the shares. So, in a real world example, you can literally get rid of $80,000 worth of unsecured credit card debt and keep a co-op worth $300,000. That’s a ton of flexibility that’s now built into the law.  In a recent case I filed, we were able to do just that. Now, each particular case has its own issues and obviously this is only general legal advice, but I can tell you that countless people that never would have been able to file a Chapter 7 Bankruptcy are now able to file.

In future articles, I’m going to cover further topics surrounding this new law.  I’m going to tell you what the new law means for keeping your cars and your money. And if you take one lap around Sheepshead Bay Road, you’ll see its readily apparent that people have cars and money… and cell phones… and, yes, even sushi.

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Daniel Gershburg Esq., is a real estate and bankruptcy attorney with offices in Sheepshead Bay and Manhattan. The practice was specifically set up to change the way people view attorneys, by incorporating radical ideas like calling people back quickly, returning emails, giving clients ’round the clock access to their cases and charging low fees. For more information please visit Brooklyn Real Estate Attorney Daniel Gershburg‘s website.

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