Can You File for Chapter 7 Bankruptcy in New York Without Losing Your Home and Car?

by Michael H. Schwartz
Bankruptcy lawyer sitting at desk.

People who are considering whether to file for Chapter 7 bankruptcy tend to fall into two camps. In one camp, we have those who fear that they will automatically lose their home and car during the bankruptcy process. In the other camp, we have those who are convinced that they can never lose their home in a bankruptcy. Neither camp is right. Instead, it depends on your circumstances.

Here, we discuss the different circumstances in which New York’s exemption laws can help you to keep your home and car when you file for Chapter 7 bankruptcy. However, if you wait too long and fall behind in making your home or car payments, your options will become limited. So, as soon as you realize that your debt problems are becoming overwhelming, run – don’t walk – to the New York bankruptcy law firm of Michael H. Schwartz, P.C.

For more than 40 years, we have helped thousands of clients to get rid of their debt without losing any of their possessions. We are ready to help you, too. Call or reach us online now to learn more in a free consultation.

How You Can File for Chapter 7 Bankruptcy and Keep Your Home

Young couple having debt problems on how to pay their loans.The goal of a Chapter 7 bankruptcy is to wipe out your debts. That’s why you will often hear attorney Michael H. Schwartz refer to Chapter 7 as the “Holy Grail” of bankruptcy. The process can give you a fresh financial start.

Technically, on the date that you file a petition for Chapter 7 bankruptcy, your assets become the property of the bankruptcy estate. Those assets could potentially include your home. The bankruptcy trustee appointed to your case will then sell those assets in order to pay off your unsecured debts such as your credit card bills, personal loans and medical expenses.

However, under the U.S. Bankruptcy Code, you can protect certain assets that you will need in order to maintain a reasonable standard of living. In other words, you can “exempt” certain assets. Here’s how the exemption process works when it comes to protecting your home:

First, you must choose whether you will use the Federal Homestead Exemption (11 USC § 522(d)(1)) or the New York Homestead Exemption (CPLR § 5206(a)). As of April 2019, you can protect up to $25,150 of equity in your home under the federal exemption. As we explain below, the New York exemption amount is more generous. For that reason, most people in elect to use that one instead of the Federal one.

Let’s assume that you choose the New York State Homestead Exemption. You can use this exemption to protect your equity in a home, condo, apartment, mobile home or your share in a co-op. However, it will apply only to your primary residence – not a second home or a vacation home.

If you are a married couple who is filing for Chapter 7 bankruptcy together, then you can double your exemption amounts under New York law. However, both spouses must follow the same schedule of exemptions. For instance, if you choose the New York Homestead Exemption, your spouse cannot use the Federal one.

Second, you must determine how much equity that you have in your home. You determine equity by subtracting the amount you still owe on your mortgage from your home’s fair market value. For example, if your home’s fair market value is $300,000, and you owe $150,000 on your mortgage, then you will have $150,000 of equity in your home.

The New York Homestead Exemption amount will depend on which county you live in. The amount adjusts every three years to account for changes in cost of living. Since April 2018, the exemption amounts in New York are:

  • $170,825 for property in Kings, Queens, New York, Bronx, Westchester, Putnam, Nassau, Suffolk, Rockland and Richmond counties
  • $142,350 in Albany, Dutchess, Orange, Columbia, Ulster and Saratoga counties
  • $85,400 in all other counties.

So, if you are a married couple that files for bankruptcy together, you could claim an exemption amount from $170,800 to $341,650 depending on where your home is located. Generally speaking, if the equity in your home is less than the exemption amount which you can claim, then your home will be wholly protected from sale by a Chapter 7 bankruptcy trustee.

On the other hand, if the equity in your home exceeds the exemption amount which you can claim, your home could potentially be sold. Also, you cannot use the New York Homestead Exemption to protect the equity in your home in a foreclosure proceeding.

For this reason, you should get in touch with attorney Michael H. Schwartz as soon as possible. He has never lost a home in a bankruptcy action. He will explain and pursue all options available to you for keeping your home while, at the same time, wiping out your debts through Chapter 7 bankruptcy.

How You Can File for Bankruptcy and Keep Your Car

If you file for Chapter 7 bankruptcy in New York, you may also be able to keep your car. First, you must choose which exemption scheme you want to use – New York or Federal. Remember: You must choose one scheme or the other. You can’t use both. Currently, the exemption amounts are:

  • New York – Up to $4,550 in equity in one motor vehicle (up to $11,375 if the vehicle is equipped for a disabled person) plus up to $1,150 under the New York Wildcard Exemption (if you have not used the New York Homestead Exemption).
  • Federal – Up to $4,000 (plus, you can use the Federal Wildcard Exemption of $1,325 plus up to $12,575 of any amount that you do not use while claiming the Federal Homestead Exemption).

Second, you must calculate how much equity that you have in your car. You start by determining the car’s fair market value. Typically, you can find this value from a source such as Kelley Blue Book, Edmunds or the National Automobile Dealers Association. If you own your car outright, then your equity will be the same as the car’s fair market value. If you are financing your car, then the equity will be the car’s value minus what you still owe.

If the equity in your car does not exceed the exemption amount that you claim, then you can keep your car. If not, then it would be subject to sale.

Keep in mind: If you are financing your car, and you fall behind on your payments, the lender could choose to repossess it. You would be unable to use the New York or Federal Motor Vehicle Exemptions. However, you may have other options. For instance, you could be in a position to reaffirm the loan. In other words, you could enter an agreement with the lender in which you agree to make payments after you go through the bankruptcy process.

Get Help from a New York Chapter 7 Bankruptcy Lawyer Today

For more than four decades, attorney Michael H. Schwartz has helped individuals and families throughout New York to go through the Chapter 7 bankruptcy process without losing their homes or cars. To discuss how Michael and our Westchester County legal team can help you, call 1-800-ON-MY-SIDE today or reach us online and schedule your free consultation.

Michael H. Schwartz is the largest filer of bankruptcy cases for people living in Westchester and Rockland counties in New York. A graduate of New York Law School, Michael has been licensed to practice in New York State courts since 1983. He is also licensed to practice in the U.S. Bankruptcy and District Courts for the Southern, Eastern and Northern Districts of New York and the District of New Jersey as well as the Second Circuit U.S. Court of Appeals. He is a graduate of Max Gardner’s Bankruptcy and Veterans’ Boot Camps. Several media outlets have reported on his cases or sought his insights, including The New York Times.