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Bill to increase exemptions in bankruptcy will put State code back in touch with reality

Posted: June 18, 2010

Buffalo, NY -- A bill co-sponsored by Assemblywoman Crystal D. Peoples-Stokes of the 141st District and seven other members of the Assembly proposes to change the exemptions allowed in Chapters 7 and 13 bankruptcy for New York State. Three major amendments would increase exemptions for cars from $2,400 to $4,000, tools used in a trade from $600 to $3,000, and homes in the counties of Western New York from $50,000 to $75,000 (areas with higher housing costs would see even higher exemptions). The bill, A08735, would also institute a Cost of Living Allowance (COLA) so that in the future, exemptions will increase as the value of goods and cost of living goes up.

Another significant change is that the bill would allow New York State residents the same option as other states have, which is to choose between the exemptions allowed by Federal law and the exemptions allowed by the state in which they live.

“In my opinion, these changes are long past due,” said Jeffrey Freedman, senior partner, Jeffrey Freedman Attorneys at Law. “New York is one of a handful of states that has not had a COLA built into its law, and other than the homestead piece -- which increased in 2005 from $10,000 to $50,000 -- exemptions haven’t been increased since 1976.”

The purpose of bankruptcy, he said, is not to impoverish debtors and make them dependent on state assistance, but to give them a fresh start. This law will help ensure debtors can continue to work and have transportation to get to work.

“Cars, for example, cost more and have a higher book value in today’s market than they did 34 years ago. And for a mechanic or a carpenter, even $3,000 for tools is low, but at least it’s a step in the right direction. Obviously these people can’t be expected to continue to work without their tools,” Freedman said. In a bankruptcy tools are valued at the price they would command at auction.

The bill, which has been through committee and passed in the Assembly, now has to go through the Senate. Senator Eric T. Schneiderman is supporting the bill, which has had three readings on the Senate floor. The Senator’s office said he would like to see it passed and signed into law within the next two weeks.

Other exemption increases include: books and religious texts from $50 to $500; domestic animals and food from $450 to $1,000; one watch from $35 to $1,000; and the so-called “wildcard” on personal property/bank accounts and cash if no homestead exemption is claimed, from $0 to $1,000.

“Current levels of exemptions in New York State have been eroded by inflation to the point of being almost meaningless,” Freedman said. “This bill will bring reality back into the process of filing bankruptcy and give debtors a legitimate chance to start over.”

Jeffrey Freedman is the senior partner in Jeffrey Freedman Attorneys at Law, which has 13 offices throughout Western New York, and has handled bankruptcy, social security disability, and personal injury cases for 30 years.

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