It only takes one serious incident to put your family in a position of financial hardship. Divorce or a sudden layoff from work could leave you charging all your expenses for a few weeks. That can result in struggling to catch up on your mortgage, credit card bills and monthly car payment. You may find yourself struggling to make the monthly minimum payment while the principle balances of your accounts grow.
As your debt increases, you will also have to pay more interest and, potentially, fees as well. This can be a devastating cycle, leaving you on the cusp of losing your home and unable to meet your basic financial obligations. For many people, bankruptcy offers protections. However, there are limits to the assets you can maintain and still discharge through bankruptcy. Many people worry that they will not be able to keep their home.
Bankruptcy law in New York protects some of your assets
The bankruptcy courts don't want people to end up homeless simply because they overextended themselves. Contrary to what some people believe, the courts will not simply seize all of your assets. While it is true that the courts may order the sale of certain valuable assets to repay creditors, there are also exemptions provided to help you maintain your home and get back on your feet after bankruptcy.
One of the most important and substantial exemptions is the homestead exemption. Up to a certain amount, you are allowed to maintain the equity you've established in your primary residence, provided that you continue to pay your mortgage. However, there are specific limits in place regarding how much equity the courts allow you to maintain during a bankruptcy.
The value of your homestead exemption varies by location
The price and upkeep costs of homes in New York vary drastically by location. Little surprise, then, that the amount of equity also varies depending on the location of the home. If your home is in Brooklyn, Manhattan, Bronx, Queens, Staten Island, Long Island, Westchester, Rockland or Putnam counties, you can exempt up to $165,550 in equity as of the most recent 2015 adjustment.
For those with properties in Dutchess, Columbia, Orange, Albany, Ulster or Satatoga counties, that exemption amount decreases to $137,950. For properties anywhere else in New York state, the exemption amount is $82,775.These amounts are due for adjustment again on April 1, 2018.
If you have built equity in your home above and beyond the exemption limit, you may have to withdraw some of your equity to repay creditors when you file bankruptcy. If your current level of equity is at or below the exemption level, however, your interest in your home will likely remain unaffected by bankruptcy proceedings.