Reviewing Lesser Known Bankruptcy Exemptions

One of the first tasks faced by a Rockland County resident who has decided to file a Chapter 7 bankruptcy petition is choosing between exemptions provided by the United States Bankruptcy Code or New York law. The two lists are different from each other, and choosing the list that best suits the debtor’s financial circumstances can be crucial. Some exemptions are better known than others. For example, New York law allows a debtor to declare up to $10,000 of value in real estate as exempt, whereas federal law limits the exemption to $15,000. If real estate constitutes a person’s largest asset, this difference alone may determine the choice. However, many debtors do not own a home, and the lesser known exemptions may be more important.

Both exemption lists allow $2,400 to be set aside for one automobile. If a husband and wife are filing, each is entitled to one such exemption. Federal law permits an exemption for unmatured life insurance contracts, professionally prescribed health aids and $1,000 in jewelry. The state provides an exemption for life insurance proceeds that have been left with the insurance company pursuant to an agreement. Both federal and state exemption lists include alimony and child support, but the federal list limits the amount to “the extent reasonably necessary for the support of the debtor.”

Debtors who are receiving or are eligible to receive benefits such as Social Security and disability payments, veterans benefits and payments from pension and profit-sharing plans should read both lists carefully. Federal law permits exemptions for such benefits, but excludes certain kinds of stock bonus payments. State law does not exempt stock bonus payments per se, but it exempts several different kinds of payments from trusts and annuity contracts. New York law allows the exemption of up to $7,500 of recoveries for personal injuries, while federal law provides an exemption of $15,000.