Governor Paterson Farewell Gift Helps Homeowners With Increased Exemptions – A Bankruptcy Game Changer Has Arrived

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I previously blogged on a proposed bill that would significantly help some New York homeowners with an increased homestead exemption. Well, the bill is finally a law. It just went into effect on 1/22/11. Under the new law, Chapter 13 repayment plans become a much more viable option for many people to use to save their homes, while wiping out a large part of their unsecured credit card debt. Here is my prior blog which explains the significance of this change and how it may help: Bankruptcy Game Changer May Be Coming Soon (7/14/10).

Here is more info on the new law:

I have also included the Wall Street Journal’s article on this below.

Associated Press
ALBANY, N.Y. — Gov. David Paterson has signed a law raising the value of home equity, household goods and vehicles debtors can shield against court judgments and in bankruptcy proceedings.

The law raises from $2,400 to $4,000 the exemption protecting one vehicle owned by an individual from claims in bankruptcy court. It establishes that protection for the first time against creditor claims in other court judgments.

It raises the $50,000 limit on protected home equity to between $75,000 and $150,000 depending on where the debtor lives.

New York City officials opposed the measure, saying it impairs their ability to tow and auction cars for outstanding parking violations.

Paterson vetoed legislation broadening prevailing wage requirements for contract service workers at public agencies.

—Copyright 2010 Associated Press

I have always thought that many of New York’s exemptions were so low that it was almost like having no exemption at all. It used to be that tools of trade were exempt only up to $600. For most people this was absurd. For a mechanic or someone with computers, the exemption did not cover most of the tools needed to earn a living. Formerly, this meant that if a case was converted to Chapter 7, a trustee and the creditors could force a sale of the tools. Cars used to be exempt only up to $2400. The exemption law was stagnant with no cost of living increases. The new law brings the exemptions up to date.

Here is a summary of the changes:

Increases the homestead exemption under Section 5206 of the CPLR from $50,000 to $75,000 for counties in Upstate New York; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam.

Increases motor vehicle exemption under section 282 of the Debtor and Creditor Law from $2,400 to $4,000 for one motor vehicle. If such vehicle is equipped for use by a disabled person, the exemption amount is $10,000 in bankruptcy;

Increases the amount of the aggregate individual bankruptcy exemption for certain annuities and personal property under section 283 of the debtor and creditor law from $5,000 to $10,000;

Adds a new section 285 to the Debtor and Creditor Law permitting debtors to choose either the current federal exemptions or the new New York exemptions;

Increase the exemption for books and religious texts from $50 to $500;

Increases the domestic animals and food exemption from $450 to $1,000;

Increases one watch from $35 to $1,000 and adds jewelry and art to this category;

Increases the tools of trade exemption from $600 to $3,000;

Adds a wildcard exemption, if no homestead exemption is claimed, of $1,000 for personal property, bank account, or cash;

Provides for the exemption of one computer and associated equipment, and one cell phone;

Exempt up to $6000 cash if no homestead exemption taken and aggregate individual bankruptcy exemption totals $5000 or less.