An exemption in bankruptcy applies to property protected by law from being used to satisfy outstanding financial obligations to creditors. Because exempt property cannot be liquidated or otherwise used to pay off creditors, it is ultimately retained as the property of the party who files for bankruptcy. New Yorkers considering bankruptcy may believe that it would be in their best interests to include all of their property in exemptions, and therefore not give up any of their possessions to discharge their debts.
In some cases, a person is legally able to exempt all of their property under the various exemption laws applicable in the state. However, in other cases, debtors possess considerable assets and may not be able to responsibly cover all of their property under permissible exemptions. Attempting to include non-exempt property with exempt items can result in criminal charges being filed against the debtor.
In order to ensure that property is appropriately categorized and that non-exempt property remains available to creditors, a debtor can create an exemption plan. An exemption plan is a schedule of personal and real property owned by the debtor that provides inclusions of which bankruptcy exemptions apply to those possessed articles. The use of an exemption plan can help debtors keep their property management issues during bankruptcy beyond reproach and can help them reach the end of their difficult financial times.
The state and federal laws surrounding bankruptcy exemptions can be complicated to decipher and individuals who make mistakes may find themselves facing new legal hurdles if they exempt property that is not otherwise available for protection. For that reason, some New Yorkers may struggle to create bankruptcy exemption plans on their own. Those who wish to work with bankruptcy lawyers can choose to do so in order to prepare legally accurate exemption plans.