New York Bankruptcy Exemptions - Part Four - Protecting Non-Exempt Assets in Chapter 13

What do you do in New York State if you own property that is not exempt or exceeds the allowable exemption? If you would lose property in a Chapter 7, you can protect it by filing a Chapter 13 as long as your creditors get at least as much in the 13 as they would have received if you had filed a chapter 7.

For example: Say your residence has $60,000 of equity. Since you can only exempt $50,000, a Chapter 7 trustee can sell your home, pay you your $50,000 exemption, and distribute the other $10,000 to your creditors. But if you file a Chapter 13, your residence would be safe as long as your unsecured creditors were scheduled to receive at least $10,000 spread out over the 3 to 5 years of the Chapter 13 plan. The same is true if you own some non-exempt property, for example a 4-wheeler, or an empty lot you hope to build a home on some day.

One of the major reasons people file a Chapter 13 is to protect property that they would lose if they had filed a Chapter 7.

The most common and costly mistake people make who try to file bankruptcy without an attorney, or who hire an attorney not fully familiar with the exemption laws, is that they end up losing property (a tax refund, or some property they transferred before filing bankruptcy) that they might have kept if they were properly counseled.

Go to Part Five – Pre-Bankruptcy Planning

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