Although New York state has bankruptcy courts, bankruptcy is actually a federal procedure, not a state one. That means that filing procedures for New York bankruptcy are much like those in the other 49 states.
However, since some provisions vary, such as lists of property that is exempt from sale in foreclosure bankruptcies, it is important to understand the laws of the state of residence.
Seeking Information and Legal Advice
Anyone living in New York who is considering bankruptcy needs to learn both about bankruptcy procedures in general and also their state laws about bankruptcy.
Filing for bankruptcy gives a debtor a fresh start, but it is not something to be taken lightly since it can have a lasting impact on finances and credit.
Since bankruptcy is a complicated legal matter, most experts recommend bringing in a bankruptcy attorney or law firm to assist with a bankruptcy court filing in New York.
How Bankruptcy Works in New York
Bankruptcy is a legal proceeding that assists debtors who are overwhelmed by their debts or unable to meet their current debt repayment schedule. But the devil is in the details, as is often the case with legal proceedings. That's why it is important for any New York resident considering filing to read up on bankruptcy basics in the state.
All bankruptcy cases are filed in federal court. State courts – in New York as in every other state – lack the authority to hear these cases. That means that the rules and procedures are those set out in the federal bankruptcy codes. However, state laws can influence some aspects of a bankruptcy filing, notably providing lists of exempt property.
Types of Bankruptcy
A number of different types of bankruptcy are available in New York, and each is identified by the chapter number in the U.S. Bankruptcy Code where it is described.
For example, the two most common types of bankruptcy in New York are Chapter 7 and Chapter 13. These are described respectively in Chapter 7 and Chapter 13 of the U.S. Bankruptcy Code.
Bankruptcy Courts in New York
State courts in New York include: Civil Court, Criminal Court, Supreme Court, District Court , County Court and Justice Courts.
Since bankruptcy cases are federal proceedings, each case must be filed in the United States Bankruptcy Court, a federal court, not a state court.
The federal court system is divided into districts, with every state having at least one. New York, given its large population, has four districts, and each district has several courthouses.
Here is a summary of the New York federal court districts and the counties they serve:
New York City (Manhattan)
(concurrent jurisdiction Greene and Ulster)
Richmond (Staten Island)
Each of these district courts have different courthouse locations that are important to know for those planning on doing their own filing in person. However, those who retain a bankruptcy attorney in New York will have fewer issues with the court's location since a bankruptcy case is almost always filed electronically from the attorney’s office.
Papers can be filed instantly, without waiting for the bankruptcy courthouse to open, which is important in order to avoid a foreclosure sale, for example.
Qualifying for Bankruptcy in New York
There is not one single set of qualifiers for those intending to file for bankruptcy in New York. Rather, the factors determining eligibility are different for each type of bankruptcy.
The two most common types of bankruptcy for individuals in New York are Chapter 7 and Chapter 13. These are very different proceedings and each has its own restrictions as to who qualifies to file.
Qualifying for Chapter 7 Bankruptcy
Chapter 7 is not only the most common individual bankruptcy filing, but also one of the easiest and fastest to accomplish. It is often used to clear medical or credit card debts.
Termed “liquidation bankruptcy,” a Chapter 7 bankruptcy involves selling all assets owned by the debtor that are not designated as exempt under applicable law, then using those proceeds to pay creditors.
Once real and personal property assets are sold and the proceeds distributed, much of the remaining debt, if any, is forgiven as part of the bankruptcy discharge. Some debts, like certain student loans and back child support payment are not dischargeable in bankruptcy.
Eligibility for Chapter 7 Bankruptcy
Debtors are eligible to file for Chapter 7 bankruptcy if they pass the New York bankruptcy means test. This test compares an individual's income with the median of a comparable household in the state. Generally, those with yearly income that is less than the median New York income qualify for Chapter 7 bankruptcy.
Recent prior bankruptcy filings can disqualify a debtor from filing for Chapter 7 in New York. For example, if a debtor filed a petition within the prior six months, and that petition was dismissed due to the debtor's willful failure to appear before the court or to comply with court orders, they are ineligible from filing again.
They may also be barred if they voluntarily dismissed a case within the prior six months because their creditors sought relief from the Bankruptcy Court to recover property on which they held liens.
Chapter 7 Exempt Assets
Some assets are exempt from Chapter 7 bankruptcy liquidation – the debtor gets to keep them even with a bankruptcy filing. New York has set out its own exemptions, so this is one area of bankruptcy law where New York rules differ from those of other states and from federal law.
Qualifying for Chapter 13 in New York
Chapter 13 bankruptcy, sometimes called wage earners' bankruptcy, allows an individual with regular income to work out a reorganization plan with their creditors to manage their debts.
Any individual can file for Chapter 13 bankruptcy in New York if they need help reorganizing their debts and they have stable and regular income. This need not be the same amount every period, but likely to continue periodically.
Required Income Amounts for Chapter 13 Bankruptcy
While New York does not set a floor on the required income amount, it must be sufficiently high to allow the debtor to pay for basic living costs, as well as make monthly payments to the bankruptcy court trustee to distribute among debtors for three to five years.
The total amount required obviously varies from debtor to debtor and depends on the amount of debts.
Some debts must be paid in full; others might be reduced. In addition, the debtor's outstanding obligations cannot be too high. Under current law, the total combined unsecured and secured debt amount is $2,750,000.
Bankruptcy Exemptions in New York
Bankruptcy exemptions are laws that permit a debtor filing for Chapter 7 to retain certain assets rather than offering them for sale to pay creditors. New York permits individuals filing bankruptcy to choose between using the federal bankruptcy exemptions or the state exemptions. Only those who have resided in the state for two years or more can use the state exemptions.
New York exemptions include three broad categories: real property, personal property and intangible property. The New York Homestead Exemption protects home equity up to a maximum amount. This amount varies depending on the county in which the property is located.
Personal Property Exemptions
New York law sets out a list of personal property exemptions, which include:
- Home appliances, like stoves.
- Sewing machines.
- Religious texts.
- Family photos and portraits.
- School books.
- Domestic animals.
- Food for the debtor and their family.
- Clothing and household furnishings up to a set maximum value.
- Necessary tools for the debtor's trade up to a set maximum value.
- Uniforms, arms,and equipment used in military service.
- Medical and dental accessories.
Exemptions for Vehicle and Real Property
New York bankruptcy exemptions also allow a debtor to retain equity in one vehicle as long as it does not exceed $4,550, or $11,375 for a disabled person.
There is also an $1,150 wildcard exemption in New York for any non-real estate property that isn’t otherwise protected by exemptions. This exemption is available only to those who did not use the state homestead exemption.
How to File for Bankruptcy in New York
Anyone wishing to file for bankruptcy in New York should:
1. Determine Bankruptcy Type
In order to file for bankruptcy in New York, an individual must first determine which type of bankruptcy is appropriate for them. As foreclosure bankruptcy is very different from reorganization bankruptcy, the choice may be clear, but it is always a good idea to get legal counsel.
2. Choose Federal or New York Exemptions
New York state offers its own bankruptcy exemptions to assist an individual in retaining their core holdings, like a residence and its furnishings, a vehicle and retirement accounts. However, the federal exemptions might work better for some debtors.
3. Fill Out the Relevant Forms
Locate the bankruptcy forms necessary to file the type of bankruptcy on the U.S. Courts website. Download or print the forms, fill them out, then file them in the appropriate bankruptcy court. This involves listing assets, debts, creditors and exemptions, along with other financial matters.
All of the forms required to file bankruptcy are available at the U.S. Courts website. They can be printed out or downloaded. Different forms are required for different types of bankruptcies.
A New York debtor should also gather their tax returns and other documents relating to their financial situation when compiling their financial records for bankruptcy. They should also attend a credit counseling course with an approved provider within 180 days before filing.
After Filing for Bankruptcy in New York
After an individual files a bankruptcy petition in New York, creditors are not permitted to take any action to collect debts. This "automatic stay" is an important benefit of the federal bankruptcy law since it puts a halt to all harassing phone calls, repossession, collection letters and threat of lawsuits.
This can be a great relief to a debtor facing collection actions like foreclosure and wage garnishment.
A bankruptcy petition that is accepted by the court is assigned to a bankruptcy trustee who arranges a meeting with the creditors. The debtor must attend this meeting and answer questions from the creditors and the court trustee about the case.
How to Find a Bankruptcy Lawyer in New York
If an individual decides to hire an attorney to file for bankruptcy in New York, they can turn to the bankruptcy court or to the state or local bar association for lists of experienced attorneys. Those without funds to pay for an attorney can contact the Legal Services Corporation.
FAQs About Bankruptcy in New York State
How do you qualify for bankruptcy in NY?
There is not one single set of qualifiers for those intending to file for bankruptcy in New York. Rather, the factors determining eligibility are different for each different type of bankruptcy.
The two most common types of bankruptcy for individuals in New York are Chapter 7 bankruptcy and Chapter 13 bankruptcy. Each type is a very different proceeding and has different restrictions as to who qualifies.
How long does bankruptcy take in NY?
Different types of bankruptcy take different amounts of time. Chapter 7 proceedings can wrap up in as little as six weeks. Chapter 13 can stretch on for five years.
Do you need a lawyer to file bankruptcy in New York State?
While it is legally feasible to represent yourself in bankruptcy, the proceeding is complex and legal help is recommended.
How much does it cost for a bankruptcy in New York?
In 2022, it cost $306 to file for Chapter 7 bankruptcy in Tennessee and $281 to file for bankruptcy under Chapter 13.
What is the difference between Chapter 7 and Chapter 13 bankruptcy in New York?
The most common individual bankruptcy filings are under Chapter 7. Termed “liquidation bankruptcy,” a Chapter 7 bankruptcy involves selling all assets owned by the debtor that are not designated as exempt under applicable law. This includes real and personal property.
Chapter 13 is reorganization bankruptcy where debts are rescheduled to make it easier for the debtor to keep up on payments.
- United States Bankruptcy Court: Eastern District of New York
- United States Department of Justice: Trustee Program
- United States Department of Justice: Credit Counseling Agencies
- United States Bankruptcy Court: Southern District of New York Free Legal Clinic
- United States Bankruptcy Court: Eastern District of New York Filing Fees
- United States Bankruptcy Court: Western District of New York
- United States Bankruptcy Court: Northern District of New York
Teo Spengler earned a JD from U.C. Berkeley Law School. As an Assistant Attorney General in Juneau, she practiced before the Alaska Supreme Court and the U.S. Supreme Court before opening a plaintiff's personal injury practice in San Francisco. She holds both an MA and an MFA in English/writing and enjoys writing legal blogs and articles. Her work has appeared in numerous online publications including USA Today, Legal Zoom, eHow Business, Livestrong, SF Gate, Go Banking Rates, Arizona Central, Houston Chronicle, Navy Federal Credit Union, Pearson, Quicken.com, TurboTax.com, and numerous attorney websites. Spengler splits her time between the French Basque Country and Northern California.