Macco & Corey P.C.

How Much Equity Can I Have in My Home and Still File Chapter 7?

How Much Equity Can I Have in My Home and Still File Chapter 7?

Chapter 7 bankruptcy, sometimes called “liquidation bankruptcy,” allows individuals to discharge most of their unsecured debts for a fresh start. During this process, a bankruptcy trustee may sell certain non-exempt assets to repay unsecured creditors. Exempt assets are those protected under state and federal laws, and this protection extends to the equity in your home under New York’s homestead exemption laws.

However, the amount of equity you can have in your home while filing for Chapter 7 bankruptcy depends on several factors, including New York’s homestead exemption laws.

New York’s Homestead Exemption

The homestead exemption in New York protects significant equity in your primary residence from being seized to pay off creditors (including credit card debt, personal loans, and mortgage payments) in a Chapter 7 bankruptcy. The “primary residence” can be a house, condominium, cooperative, mobile home, or houseboat. 

The current limits for New York homestead bankruptcy exemptions valid until April 1, 2024 are listed below. (Note: Federal homestead exemption limits are separate, but federal exemptions and state exemptions cannot be combined when filing bankruptcy.) 

$179,950: Kings County (Brooklyn), Queens County (Queens), New York County (Manhattan), Bronx County (The Bronx), Richmond County (Staten Island), Nassau, Suffolk, Westchester, Rockland, or Putnam County. 

$149,975: Albany, Dutchess, Columbia, Saratoga, Orange, or Ulster County

$89,975: All other counties

Pen With Bankruptcy Papers

Home Equity Calculation

To understand how much equity you can have and still file for Chapter 7 bankruptcy in New York, you must calculate your home’s equity. To do this, subtract the amount you owe on your mortgage(s) and any other liens from the current fair market value of your home. For example, if your home is worth $300,000 and you have a mortgage balance of $200,000, your equity is $100,000.

The key question is whether your equity falls within the allowed exemption limit for your area. If your equity is equal to or less than the exemption limit, your home is generally safe from liquidation in a Chapter 7 bankruptcy.

Exemption for Married Couples Filing Joint Bankruptcy in New York

Spouses who file a joint bankruptcy in New York could double the homestead exemption for their primary residence. This means that if both spouses are on the deed of the primary residence and are filing for bankruptcy jointly, they could potentially protect up to double the exemption limit for their county.

For example, if the homestead exemption for an individual in a county is $100,000, a married couple filing jointly could potentially protect up to $200,000 in equity in their primary residence.

Eligibility for Using a Homestead Exemption in New York Chapter 7 Bankruptcy

In New York, you can initiate a bankruptcy proceeding after residing in the state for over 180 days. However, to utilize New York’s specific exemptions, you must have been a resident for a minimum of 730 days prior to filing. Failure to meet this residency requirement would result in the use of the exemptions from your previous state.

In situations where you have lived in multiple states within the two years before your bankruptcy filing, the exemptions applied will be based on the state in which you lived for the majority of the 180 days preceding the two-year period immediately before your filing.

The Purpose of New York’s Homestead Exemption

The homestead exemption in New York has several important functions:

  • Preserve a Safe Haven: The homestead exemption allows individuals and families in financial distress to retain their primary residence, ensuring they have a place to live. This is particularly important for debtors facing the prospect of bankruptcy and seeking a fresh start.
  • Promote Rehabilitation: Bankruptcy laws are designed to satisfy creditors and provide debtors with an opportunity to rehabilitate their financial situation. Keeping a roof over the debtor’s head is a crucial part of that process, as it can contribute to their ability to recover and regain financial stability.
  • Family and Community Stability: The homestead exemption recognizes the importance of family and community stability. It helps protect families from being uprooted and maintains the fabric of neighborhoods and communities.
Judges Hammer With Bankruptcy Chapter 7 Document

Frequently Asked Questions

What if my home’s value increases after I file for bankruptcy?

The equity limit is determined at the time of filing. If your home’s value increases after filing for bankruptcy, it usually won’t affect your exemption. However, any additional equity may be considered non-exempt.

What happens if I have a primary residence and a vacation home in New York?

The homestead exemption generally applies to your primary residence. The exemption for a vacation home would be different. Understanding the implications of owning multiple properties is essential, and a bankruptcy attorney can help.

Can a Chapter 7 bankruptcy trustee force me to sell my home even if I qualify for the homestead exemption?

In some cases, a trustee may still investigate the property and assess its value, even if you qualify for the exemption. However, the trustee cannot sell your home if your equity is fully protected under the exemption.

Are there any exceptions to the homestead exemption for certain types of debts?

While the homestead exemption is intended to protect your home equity in bankruptcy, there may be exceptions for some debts, such as certain tax liens or spousal/child support obligations. Understanding these exceptions with help from a knowledgeable bankruptcy lawyer is vital.

How Our New York Chapter 7 Bankruptcy Attorneys Can Help Protect Your Home Equity

Our experienced bankruptcy attorney and foreclosure attorney teams at Macco & Corey P.C. understand the importance of protecting your home equity when you are filing for Chapter 7 bankruptcy in New York. Here’s how we can help ensure the preservation of your home equity:

Assessment of Your Situation 

Our first step is to carefully assess your financial situation and the equity in your home. We determine whether you are eligible to use New York’s homestead exemption and, if so, how much equity can be protected under the current exemption limits.

Maximizing Exemptions 

We will work to maximize the use of exemptions allowed under New York law. This includes taking advantage of the homestead exemption to protect as much of your home equity as possible while complying with legal requirements.

Legal Guidance 

Our attorneys are well-versed in New York bankruptcy laws and have a deep understanding of the complex regulations governing exemptions. We will provide you with expert legal guidance to ensure you make the right decisions throughout the bankruptcy process.

Chapter 7 Eligibility 

If Chapter 7 is the right bankruptcy option for you, we will help you understand the eligibility requirements and guide you through the entire Chapter 7 bankruptcy process. We will ensure you meet the necessary criteria to proceed with this form of bankruptcy.

Married Couples’ Considerations 

If you are married and filing jointly, we will help you understand how to double the exemption limits, potentially providing additional protection for your home equity.

Communication with Creditors 

Our attorneys can communicate with your creditors and negotiate on your behalf to ensure that your rights are protected and the bankruptcy process proceeds as smoothly as possible.

Documentation and Filing 

We will assist in preparing and filing all necessary documentation for your Chapter 7 bankruptcy, ensuring that your homestead exemption is correctly applied and your interests are safeguarded.

Ongoing Support 

Throughout the bankruptcy process, we provide ongoing support and address any questions or concerns you may have. We will represent your best interests to the fullest extent of the law.

Post-Bankruptcy Planning 

After your bankruptcy is complete, our attorneys can also provide guidance on post-bankruptcy financial planning to help you rebuild your financial stability.

Choose Our Skilled and Experienced New York Bankruptcy Lawyers to Protect Your Rights 

At Macco & Corey P.C., we are committed to helping you protect your home equity and navigate the complexities of Chapter 7 bankruptcy in New York. Our experienced attorneys have a deep understanding of bankruptcy laws and exemptions, and will work tirelessly to ensure that your home is safeguarded during the bankruptcy process. Your financial well-being is our priority, and we are here to support you every step of the way. Give us a call at 631-549-7900 or contact us online for dedicated debt relief counsel.