What Happens to Jewelry, Valuables in Bankruptcy?
Key Takeaways
- Rockland homeowners can protect $204,825 in equity, or $409,650 as a couple.
- Most mortgage holders have no equity a trustee could reach.
- You must claim the exemption on Schedule C; it is not automatic.
A common misconception is that you may lose your house if you have to file for bankruptcy. But the reality is that quite the opposite occurs. Continue reading to learn how you may maintain your house and how an experienced Rockland County bankruptcy attorney at The Law Offices of Allen A. Kolber, Esq. can help you in doing so.
What Is the Automatic Stay?
When you file for bankruptcy, the Automatic Stay will take effect as soon as your bankruptcy petition is filed. The court does not have to order the stay, as it is triggered automatically. More specifically, an Automatic Stay is an injunction set forth on your creditors that prohibits them from further participating in any collection activities. Such collection activities may include making harassing phone calls, sending incessant mail, threatening legal action, and more.
Notably, an Automatic Stay may take place regardless of whether you are filing a Chapter 7 bankruptcy or a Chapter 13 bankruptcy.
What Is Homestead Protection?
New York State recognizes laws referred to as Homestead Protection. Namely, these laws protect you, as a homeowner, from losing all of your house’s equity when you file your bankruptcy petition. This is made possible when you declare a portion of your property as “homestead” and therefore protect it from a forced foreclosure sale.
The homestead protection in New York depends on where the property is located. Rockland County, along with Westchester, Putnam, Nassau, Suffolk, and the five boroughs, fall into the highest tier at $204,825. In the second tier, which sits at $170,700, fall Dutchess, Orange, Albany, Columbia, Saratoga, and Ulster Counties. The remainder of the state sits at $102,400.
You should also note that married couples each claim separately, so a married couple in Rockland County is eligible to protect up to $409,650. These figures were set on April 1, 2024, and will remain in effect until they are adjusted again on April 1, 2027.
With that being said, the Homestead Protection laws apply to both a Chapter 7 bankruptcy filing and a Chapter 13 bankruptcy filing. Specifically in Chapter 13, you may make catch-up payments for your mortgage over three to five years or via a loan modification.
The Math That Decides It
Whether your house is genuinely at risk comes down to one calculation, and it is worth doing before you file rather than after.
- Start with what the house would actually sell for today
- Subtract everything secured against it, including any second mortgage or home equity line
- Subtract your homestead exemption
Whatever remains is the equity a Chapter 7 trustee may reach. If the figure is zero or negative, which describes most homeowners carrying a mortgage, there is nothing there for anyone, trustee will have little reason to touch the property. In fact, even modest, positive numbers are often ignored, because a trustee who sells a home needs to pay the broker, closing costs, and your exemption, meaning creditors may not even see any proceeds from the sale. As such, trustees do not often pursue a sale that nets the estate little value.
However, if the equity is substantial, Chapter 13 becomes the option, rather than Chapter 7. You will retain the house and build the value of that non-exempt equity into your repayment plan over three to five years, rather than surrendering the property.
Is It Possible to Lose My House if I File for Bankruptcy in New York?
Of note, your mortgage lender is covered by the Automatic Stay. Meaning, your mortgage lender will be restricted from sending you a foreclosure notice. And even if you file your bankruptcy petition an hour before your foreclosure sale, the court will deem these foreclosure proceedings as null and void.
However, it’s important to understand that the exemption is not automatically applied. You must claim it on Schedule C when you file, and an exemption left unclaimed is an exemption you do not have.
The only way in which your mortgage lender may proceed with filing a motion to the court is if they can successfully make an argument that you have not complied with the mortgage requirements set forth by the bankruptcy code.
Contact an Experienced New York Bankruptcy Attorney Today
It should go without saying that you must consult with a skilled Rockland County bankruptcy attorney immediately. At the Law Offices of Allen A. Kolber, Esq. P.C., we understand how nerve-wracking the bankruptcy process can be, which is why we are proud to help you navigate these difficult times. Contact our firm today to learn how we can represent you.
