What is the Bankruptcy Homestead Exemption in New York City?
In New York City the equity in a home may be your most valuable asset, and the thought of losing it can affect many people’s decision to file bankruptcy. However, if you file bankruptcy your home equity will be protected by “homestead exemptions” specifically designed to shield your equity from your creditors. In a Chapter 7 case the “homestead exemption” will prevent a bankruptcy trustee from selling your home in order to repay your creditors. If you need to file a Chapter 13 the homestead exemption will reduce the amount of unsecured debt you must repay to your creditors making your chapter 13 payment plan lower. In either case the “homestead exemption” will be the determining factor in keeping a home your home after filing bankruptcy.
The “homestead exemption” can only be used for your primary residence which can be any home, co-op, condo or even mobile home. Exemption systems exist at both the state and federal levels that outline what property amounts can be kept in bankruptcy. New York law allows you to choose either the state or federal exemption system when you file, but you cannot mix and match exemptions from the two. The amount of the “homestead exemption” differs greatly between the federal and New York state system. Our clients whose primary concern is protecting the equity in their home will almost always be advised to choose the New York state exemption system because of its more giving “homestead exemption” amount. The New York “homestead exemption” offers over six times the amount of protection than the federal system. In New York City the “homestead exemption” amount is $165,500 of home equity under the state exemption system and only $23,675 under the federal exemption system. If you are married and file with your spouse the homestead exemption amounts can also be doubled. To take advantage of the New York state “homestead exemption” you must have resided in New York for at least two years before filing your case.
So if you use the New York state exemption system and file bankruptcy with your spouse you can keep up to $332,000 of home equity out of the bankruptcy estate when filing for Chapter 7. This will allow most of our clients to keep their homes when filing bankruptcy. If you home equity isn’t covered by the homestead exemption or if you are behind on your mortgage then you may need to file Chapter 13. In a Chapter 13 you will pay back a portion of your debt through a court ordered repayment plan instead of receiving an outright discharge of debt. However, with the help of the “homestead exemption” the plan will be more affordable, and you should be able to make your mortgage payments and stay in your home.
If you need to hear the pros and cons of bankruptcy but are concerned about what could happen to your home if you file consult a qualified attorney. Bankruptcy is the most powerful debt relief tool available and is intended to protect your home and other assets in the process. The law understands that you will need your home in order to make the most of your fresh start after bankruptcy. Specific protection in the form of the “homestead exemption” is given to people filing bankruptcy, and in New York the exemption amount is very generous. If you live in New York City please contact the Law Offices of William Waldner online or at 212.244.2882 to arrange a free bankruptcy consultation today. We maintain a 99% Chapter 7 discharge record in New York City as of 9/31/16, and our clients always keep their homes, cars and valuable assets if they decide to file.
This article is intended for educational purposes only. By reading this no attorney-client privilege has been created.