New York Bankruptcy Exemptions

Exemptions are the rules that determine which of your assets you keep when you file bankruptcy. New York is an "opt-out" state — sort of. Unlike most opt-out states, New York lets its residents choose between the New York state exemption scheme and the federal exemption scheme. The choice can be the single most important decision in a Chapter 7 case, and it is not always obvious. Below is the framework we use to make the call.

Exemption amounts change. The figures below are current at writing, but New York indexes most state exemptions every three years and the federal exemptions are adjusted every three years on April 1. We use live numbers at the petition date.

The Homestead Exemption

The homestead exemption is the biggest single difference between the two schemes for New York homeowners:

New York state exemption (CPLR 5206): Tiered by county. Currently roughly $204,000 of equity in counties including New York, Bronx, Queens, Kings, Nassau, Suffolk, Rockland, Westchester, and Putnam. Lower amounts for less expensive counties. Doubled for married couples filing jointly who both own the property.
Federal exemption (11 USC 522(d)(1)): Approximately $30,000 of equity. Doubled for joint filers.

For most New York homeowners with meaningful equity, the New York homestead is dramatically more generous — and the New York state scheme is the right pick.

Motor Vehicle Exemption

New York state: $5,150 of equity in one motor vehicle (higher amount for a vehicle equipped for a disabled debtor).
Federal: Approximately $4,800 of equity in one motor vehicle.

Household Goods, Clothing, and Personal Property

New York state: Up to $11,975 aggregate in furniture, appliances, household goods, clothing, jewelry, books, family Bible, and similar property. Specific items have individual caps.
Federal: Up to $700 per item, with a $14,875 aggregate cap in household furnishings, books, clothing, and similar property.

Tools of the Trade

New York state: Up to $3,575 in working tools, professional instruments, books, and similar property necessary for the debtor's trade or profession.
Federal: Approximately $2,800.

Retirement Accounts

Both schemes fully exempt qualified retirement assets — 401(k), 403(b), 457, defined benefit pensions, and similar ERISA-qualified plans. IRAs and Roth IRAs are also fully exempt up to a high statutory cap (currently around $1.5 million). The retirement exemption is the same under both schemes in practice; it is rarely the deciding factor.

Wages

New York state: 90% of wages earned within 60 days before filing.
Federal: No specific wage exemption beyond the wildcard.

Cash and Bank Accounts

New York state: $1,150 of cash if the debtor does not claim the homestead exemption.
Federal: No specific cash exemption beyond the wildcard.

The Wildcard Exemption

The wildcard is what makes the federal scheme attractive to renters and to homeowners without much equity:

New York state: No general wildcard. (There is a $1,150 cash exemption for non-homestead filers and a small unused-homestead supplement, but no broad wildcard.)
Federal: Approximately $1,475 plus up to $13,950 of unused homestead exemption. A renter or a low-equity homeowner has roughly $15,000 of wildcard available, useable on cash, tax refunds, bank balances, or any other property.

The federal wildcard is the reason most New York renters file under the federal scheme. The New York scheme is the reason most New York homeowners with material equity file under the state scheme.

Other Exemptions

Public benefits. Social Security, unemployment, public assistance, veterans' benefits, workers' compensation, crime victim compensation, and similar benefits are exempt under both schemes.
Insurance proceeds. Life insurance benefits, disability benefits, and certain annuity proceeds are exempt subject to specific rules.
Personal injury recoveries. Up to $9,300 (federal) or full exemption (New York for compensatory portion).
Domestic support. Alimony and child support to the extent reasonably necessary for support of the debtor and dependents.

Joint Filings and "Stacking"

Married couples filing jointly can each claim a full set of exemptions, effectively doubling most amounts. Both spouses must select the same scheme — you cannot mix state and federal exemptions in a single case.

Domicile Requirements

To use a state exemption scheme, the debtor must have been domiciled in that state for 730 days before filing. Recent movers to New York may be required to use the exemption scheme of their prior state, or in some cases the federal exemptions if the prior state's scheme is unavailable to non-residents.

Wages, Bank Accounts, and the Exempt Income Protection Act

The wage exemption under CPLR 5205(d)(2) protects 90 percent of wages, salary, commissions, and similar compensation earned within sixty days before filing. The protection follows the funds into the debtor's bank account, where it overlaps with the protections of New York's Exempt Income Protection Act (EIPA), codified at CPLR 5222-a.

EIPA requires the bank holding a debtor's account to leave a statutory minimum on deposit when a creditor serves a restraining notice — currently $3,675 if the account holds directly-deposited exempt funds such as Social Security, public assistance, unemployment, or workers' compensation, and a lower amount otherwise. The bank must also provide exemption claim forms to the debtor within two business days of the restraint. EIPA does not eliminate the need to file a claim in many cases, but it dramatically reduces the harm a creditor can do before the debtor has a chance to assert exemptions.

Retirement and Education Accounts

Section 522(b)(3)(C) and (n) of the Bankruptcy Code exempt ERISA-qualified retirement plans, defined-benefit pensions, and 403(b) plans without dollar limit, and IRAs and Roth IRAs up to the inflation-adjusted statutory cap (currently approximately $1.5 million in aggregate). Rollover IRAs that originated in qualified plans are typically exempt without limit because they retain ERISA-qualified character.

Section 529 college savings plans and Coverdell education accounts have their own exemption rules under § 541(b)(5) and (6) — contributions made within 365 days of filing are property of the estate, contributions made between 365 and 720 days are exempt up to $7,575, and earlier contributions are fully exempt provided the beneficiary is a child, stepchild, grandchild, or step-grandchild.

The Bankruptcy Estate and Recently Acquired Property

Section 541(a) defines the property of the estate as everything the debtor owns, of any nature, as of the petition date. Section 541(a)(5) extends estate property forward to capture inheritances, divorce property settlements, and life insurance proceeds the debtor becomes entitled to within 180 days after filing. The 180-day window is one of the few "forward-looking" features of the Bankruptcy Code and is worth careful planning for clients with elderly parents or pending divorce decrees.

Pre-Filing Exemption Planning

Some pre-filing exemption planning is permitted — even encouraged. A debtor can legitimately convert non-exempt assets into exempt assets before filing, for example by paying down the mortgage with cash, contributing to an IRA, or purchasing a homestead. The line between legitimate exemption planning and improper hindering, delaying, or defrauding of creditors is fact-intensive, however, and depends on the timing, amount, and intent of the conversion.

The Bankruptcy Code includes specific anti-abuse provisions:

Section 522(o): Reduces the homestead exemption by any amount of non-exempt property converted into homestead equity within ten years of filing with intent to hinder, delay, or defraud creditors.
Section 522(p): Caps the homestead exemption at $189,050 (current adjusted figure) for property acquired within 1,215 days of filing.
Section 727(a)(2): Denies the entire discharge to a debtor who transferred or concealed property within one year of filing with intent to hinder, delay, or defraud.
New York Debtor and Creditor Law § 273-277: Provides creditors and trustees a state-law cause of action to set aside fraudulent conveyances within four to six years.

Done right, pre-filing planning produces a defensible petition that withstands trustee scrutiny. Done wrong, it can cost the debtor not only the planned-for exemption but the discharge itself.