Lame Duck Governor Gives New Yorker Debtors a Going-Away Present – An Expansion of Bankruptcy Exemptions

On Christmas Eve, without fanfare, Governor David A. Paterson finally signed into law s. 7034-A / A08735A, which will increase the amount of bankruptcy exemptions available to debtors in the State of New York. Additionally, debtors will be able to opt out of the State exemptions and choose the exemptions under Federal law instead. Such flexibility will be welcomed among New York State bankruptcy attorneys, and all debtor advocates should agree that this expansion is a long time in coming.

The following are some of the critical changes:

THE HOMESTEAD EXEMPTION, under CPLR s. 5206, will rise (1) from $50,000 to $150,000 in the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and Putnam, (2) from $50,000 to $125,000 in the counties of Dutchess, Albany, Columbia, Orange, Saratoga and Ulster, and (3) from $50,000 to $75,000 for the remaining NY counties. The homestead exemption can be doubled for married debtors who file a joint bankruptcy petition.

THE MOTOR VEHICLE EXEMPTION, under s. 282 of the Debtor and Creditor Law, will rise from $2,400 to $4,000. If the vehicle is equipped for use by a disabled person, the bankruptcy exemption amount will be $10,000.

THE CASH EXEMPTION will rise from a maximum of $2,500 to a possible $6,000. This is especially critical for those who are expecting a tax refund. The law will be that, if you don’t take advantage of the homestead exemption and the aggregate of your personal property exemptions is $5,000 or less, then you will be entitled to take an exemption of cash of up to $5,000 under s. 283 of the Debtor and Creditor Law as well as up to another $1,000 of cash under CPLR s. 5205. Cash has a statutory definition of currency of the U.S. at face value (would be an interesting question if you had a couple hundred U.S. silver dollars), savings bonds of the U.S. at face value, the right to receive a refund of federal, state and local income taxes, and deposit accounts in any state or federally chartered depository institution.

THE GROCERY EXEMPTION will rise from that which is necessary to sustain the debtor and his or her family for sixty (60) days to that which is necessary to sustain the debtor and his or her family for four months. With food prices on the constant rise, this is an important exemption to keep in mind when planning to file.

The personal property exemption was expanded to include ONE COMPUTER AND ASSOCIATED EQUIPMENT as well as ONE CELL PHONE.

FEDERAL OPTION: For the first time in history, a debtor in New York will be allowed to avail himself/herself of the federal exemptions found in 11 U.S.C. s. 522. However, a debtor will not be permitted to pick and choose. Rather, a debtor’s choice will be mutually exclusive. A debtor may choose either all his or her exemptions under the federal law or all his or her exemptions under New York State law.

THE EFFECTIVE DATE is not a date certain, but rather “The thirtieth day after becoming law.” Nevertheless, it will not be long now.

Lame Duck Governor Gives New Yorker Debtors a Going-Away Present – The Long-Overdue Expansion of Bankruptcy Exemptions.

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