Bankruptcy

New York Bankruptcy Law Will Protect More Assets in Chapter 7 Bankruptcy

By guest-writer

A bill recently signed into law in New York outlines more extensive exemptions for petitioners filing under Chapter 7 of the U.S. Bankruptcy Code. The new law, according to Bloomberg news, has been lauded by consumer advocates and grumbled about by bankers and some city officials.

So what?s the big deal about changing Chapter 7 bankruptcy exemptions? A lot, if you?re interested in keeping your valuables when you enter bankruptcy protection.

How Chapter 7 Exemptions Work

To understand the significance of the New York law, it?s essential to understand how exemptions work in Chapter 7 bankruptcy. Here?s an outline.

• Laws by state: Each state outlines its own exemptions and is responsible for updating those exemptions as values and costs fluctuate.
• Protected property: Exemptions outline property that is protected from the Chapter 7 liquidation sale. Any property that is not protected by an exemption might be sold by a filer?s bankruptcy trustee to raise money to repay the filer?s creditors. However, in most cases there is no sale of any property thanks to the protection of exemptions.

Changes to New York Chapter 7 Exemptions

So what will change about the Empire State?s Chapter 7 exemptions? According to sources, a few things, including the following:

• Increased homestead exemption: It seems that New York?s homestead exemption will increase from $50,000 to up to $150,000, a move, some proponents think, that will allow more filers to keep their homes in Chapter 7 bankruptcy. Other advocates reportedly suggest that the increased dollar amount is more in line with current property values in the state.
• Increased vehicle exemption: Additionally, Chapter 7 filers will apparently be able to hold onto vehicles worth up to $4,000 above an associated loan (an increase from the earlier limit of $2,400 above). This exemption may make it easier to protect your car from repossession or towing if you have have traffic ticket debt.

Some analysts have reportedly suggested that the new changes to Chapter 7 exemptions in New York might make loans harder to come by in the state, as less money will be available for liquidation and creditor repayment in Chapter 7 bankruptcy filings. But for Chapter 7 petitioners in New York, the changes should be welcome.

Wondering about your state?s latest Chapter 7 exemption updates? For more information about the current state of Chapter 7 bankruptcy where you live, you can speak with a bankruptcy lawyer in your area.

Full post as published by The Bankruptcy Blog on December 28, 2010 (boomark / email).