Bankruptcy in a time of COVID 19

Chapter 7 Bankruptcy in the time of COVID 19

Bankruptcy is a system to help people whose assets are less than their liabilities and their income cannot catch up to the interest being charged on their liabilities. 

It is a system that is made for personal crisis or a crisis like we are in with Corona Virus.  Credit card companies charge enormous interest and it builds - the compounding interest is not fair in times like this - but they have built into their risk taking that sometimes bankruptcy will happen. 

 

The concept in the American and British common law system  of every 7 years a bankruptcy being available is very ancient and dates back to Old Testament times when all debts in Israel were cancelled every 7 years. Of course that would not work anymore but the availability of Bankruptcy in a crisis is built into our system. 

 

Not all debts need to be listed.  For example, you can avoid listing some debts like your favorite credit card and leave it to be paid and still get almost all other debts cancelled. 

 

Chapter 7 is often referred to as a "straight" or "liquidation" bankruptcy. The court appoints a trustee to oversee your case, and

 

The trustee can't take all your assets. You're permitted to keep certain "exempt property" so you're not stripped of everything you need to live and you have a foothold to get a fresh start.

 

 

 

Exempt Property

You're permitted to keep certain "exempt property" so you're not stripped of everything you need to live and you have a foothold to get a fresh start.

 

 

$170,825 in Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester and, Putnam counties.

I              Cash, Exemption              Includes: cash, bank accounts, saving bonds, and tax refunds        

$5,000 – Only available if not using Homestead Exemption. This exemption will be reduced if using more than $5,000 of Personal Property Exemption or if exempting an annuity that was purchased within the past 6 months.

 

N.Y. Debtor and Creditor Law § 283(2)

II             Homestead Exemption  Home, co-op, condo or mobile home    

$170,825  for the following counties: Richmond, Kings, Queens, New York, Bronx, Nassau, Suffolk, Westchester, Rockland and Putnam.

 

 

IV           Cars       One per debtor $4,000 limit. (If motor vehicle has been equipped for use by a disabled debtor then the limit is $10,000).           

V            New York State College Choice Tuition Savings Program Trust Fund               Funds in an account created pursuant to article fourteen-A of the education law are exempt from application to the satisfaction of a money judgment as follows:      

VIII         Pension and Retirement Benefits               Payments under a stock bonus, pension plan such as 401(k), 403(b) or other ERISA approved plan, IRA, profit sharing or similar plans are exempt.               To the extent reasonably necessary to support debtor and dependants unless the plan was established by the debtor or an insider employed the debtor.   

N.Y. Debtor and Creditor Law § 282(2)(e)

 

N.Y. Civil Practice Law § 5205(c)

 

N.Y. Ins. Law § 4607

 

IX            Personal Injury Awards  Payment on account of personal bodily injury               $7,500 which does not include pain and suffering or compensation for actual pecuniary loss.     N.Y. Debtor and Creditor Law § 282(3)(iii)

X             Wild Card for personal property, bank accounts or cash    If no Homestead Exemption is claimed     $1,000  N.Y. Civil Practice Law § 5205(a)(9)

XI            Cemetery Exemption      Land, set apart as a family or private burying ground is exempt upon the following conditions only: 1. A portion of it must have been actually used for that purpose; 2. It must not exceed in extent one-fourth of an acre; and, 3. It must not contain any building or structure, except one or more, vaults or other places of deposit for the dead, or mortuary monuments.      Completely exempt               N.Y. Civil Practice Law § 206(f)

XII          Crime Victim Award        An award under a crime victim’s reparation statute  Exempt

N.Y. Debtor a

 

New York is one of the states that lets you choose between the state exemption list and thefederal bankruptcy exemptionscheme. You won’t be able to select exemptions from each list—you must pick the system that will work best. If you choose the New York exemptions, you can also use thefederal nonbankruptcy exemptions.

 

Most people will do better using New York exemptions; however, the federal wildcard exemption is more generous and will allow you to protect any property you’d like to keep. It can be useful if you don’t own a home—the New York homestead exemption is much larger than the federal exemption—and would protect property that isn’t explicitly covered by a New York exemption, such as a boat, equity in a vacation home, or collectibles.