New York State's "Exemptions" are Increased

May 26, 2011

Author: Kirsten E. Keefe

As one of his final acts in office, on December 22, 2010, Governor David Paterson signed a significant law regarding exemptions for personal and real property, Chapter 568 of the Laws of New York 2010.  The law amends and adds certain exemptions relating to the satisfaction of money judgments under Civil Practice Law and Rules (CPLR) § 5205(a) for exemption of personal property, and under CPLR § 5206 for the exemption of real property.  The law also amends N.Y. Debtor and Creditor Law (DCD.) §§ 282(1), 283, and adds § 285 specifically regarding exemptions for debtors in bankruptcy.  The amendments update and modernize several exemptions, some of which had not been altered for decades.

An exemption can be raised in two contexts.  First, when an individual is sued and a money judgment is obtained against the person, the judgment holder can proceed under N. Y. Civil Practice Law and Rules to attempt to collect on that judgment by potentially garnishing wages, attaching a bank account and/or collecting against personal or real property.  CPLR §§ 5205 and 5206 give the judgment debtor the right to claim certain personal and real property exempt from collection.  The public policy behind exemptions is to not to leave a judgment debtor destitute and without basic necessities.

In the context of a bankruptcy, the person filing the bankruptcy – the “debtor” – is obligated to itemize all of their personal and real property for examination by the court.  If a debtor has personal or real property exceeding the exemptions’ limits, the court may be obligated to require items to be sold and for the proceeds to be used to pay-off obligations to creditors.  While this practice is in line with basic notions of fairness (to allow a debtor to keep expensive luxuries while absolving them from debt obligations seems unjust), Congress also did not want to leave debtors with nothing.  N.Y. DCD Law provides exemptions for filers and incorporates the exemptions set forth in the CPLR.  Federal law, under 11 U.S.C. § 522, provides a different set of possible exemptions.  The new law adds the possibility for a debtor in New York to elect to take the federal exemptions (N.Y. DCD. Law, § 285) but a filer must choose one set or the other; they may not pick and choose within the two laws.

New York’s exemptions have been updated sporadically through the years, but this is the most significant revision in some time.  Some amendments increase dollar values and others amend or add items, bringing out of date exemptions into the 21st Century.  Other Amendments to CPLR § 5205(a) include:

• “home heating equipment” has been added as a source of fuel for a home (previous listing included just “stoves”), and a debtor can now exempt necessary fuel for 120 days, rather than for just 60 days as previously set forth;

• the “family bible” is replaced by “religious texts”;

• a reserve for food for domesticated animals has been increased from 60 to 120 days, provided the value of the animals and food does not exceed $1,000 (raised from $450);

• a reserve for necessary food for the debtor and their family has been increased from 60 to 120 days;

• for basic household goods, “one computer and associated equipment, one cellphone,” as well as “all prescribed health aids” have been added;

• previously, only a wedding ring was listed but now “jewelry and art” has been added to the list (not to exceed $1,000);

• for farmers with a team of animals, food for the team for 120 days, rather than 60 days, can be claimed as exempt;

In perhaps the most significant addition, one motor vehicle has been added to the list of exemptions in unencumbered value up to $4,000, or up to $10,000 if the vehicle has been equipped for use by a disabled debtor (this exemption does not apply if debt is for child or other support, or if the collector is the State, its agencies or municipal corporations 1 );  and

• $1,000 exemption was added for personal property, bank account or cash that can be claimed if no homestead exemption is taken.

Regarding real property, New York’s $10,000 homestead exemptions stood the same from 1997 until 2005, when it was raised to $50,000.  The homestead exemption has been significantly amended in this new law, not only increasing the amount but also establishing a step-approach depending on the location of the property.  The homestead exemption is what can be claimed on the equity in the home, above what is owed for mortgage or other liens.  The new homestead exemptions are as follows:

• $150,000 for NYC counties, Suffolk, Nassau, Putnam, Rockland, and Westchester counties,

• $125,000 for Albany, Columbia, Dutchess, Orange, Saratoga, and Ulster counties, and

• $75,000 for all other counties

Debtor and Creditor Law already exempted a motor vehicle for purposes of bankruptcy filings.  The new law updates the values in N.Y. DCD. § 282(1) to be on par with those established in the CPLR § 5205(a)(8):  $4,000 of unencumbered value for one vehicle, up from $2,400, and $10,000 for a car equipped for a disabled debtor.

N.Y. DCD. § 283 was amended for the first time since 1982 to increase the aggregate value of personal property, as set forth in CPLR § 5205(a), and the value of annuities from $5,000 to $10,000 for a bankruptcy debtor.  The contingent alternative bankruptcy exemption, set forth in § 283(2), which can be taken if no homestead exemption is taken and the aggregate amount above is not reached, is raised to the difference between the aggregate in § 283(1) and $10,000, or to $5,000, whichever is less.

Finally, the new law added an important cost of living adjustment index to be applied to the satisfaction of all money judgments and exemptions in bankruptcy.  (CPLR § 5253)  Starting on April 1, 2012, and every three years thereafter, the dollar amounts of the exemptions shall be adjusted based on the change in the consumer price index.  The NYS Banking Department Superintendent is responsible with setting and publishing the new exemptions dollar limits.

The new exemptions became effective on January 21, 2011 and apply to the satisfaction of judgments thereafter.

Endnote

1  An interesting issue was raised after the bills were passed and the legislation was sent to the Governor for signature regarding the motor vehicle exemption.  Because of an interplay with N.Y. Vehicle and Traffic Law and CPLR § 5205, the added vehicle exemption may have hindered a municipality’s ability to enforce parking ticket violations.  Therefore, the first legislation to be signed by Governor Andrew Cuomo, Chapter 1 of the Laws of New York 2011 exempts the State, its agencies and municipal corporations from the motor vehicle exemption, CPLR §  5205(a)(8).