New York’s Real Estate Exemption

One of the pieces of property a New York family who is struggling financially is most likely to want to hang onto is the family home. For these people, New York’s homestead exemption is very important to understand, as it can help a family protect their residence even through a bankruptcy.

The homestead exemption is one of several exemptions that may come into play during a Chapter 7 bankruptcy. The general rule is that a debtor’s property has to be turned over to the bankruptcy trustee so that it can be sold to pay off a portion of the debts. However, in New York a debtor can declare certain property exempt, meaning that the debtor can keep the exempt property.

So long as a debtor chooses New York’s homestead exemption as opposed to the federal exemptions, then they can keep at least $75,000 in home equity, or $150,000 in the case of a married couple. Depending on where a person lives, an exemption of up to $150,000, or $300,000 for a married couple, may be available.

As a word of caution, however, this exemption only protects home equity from attachment in a bankruptcy, but it does not mean that a bank or mortgage company has to forgive its loan or release its mortgage. If a debtor is behind in payments, the bank can still foreclose even if the house is otherwise “exempt.”

While this post serves as a useful overview of New York’s homestead exemption law, the way in which it operates in practice can be quite complicated. To learn more about the homestead exemption or to determine if it is a good option, it may be best to speak with an experienced New York bankruptcy attorney.