Chapter 7 is often referred to as the “liquidation bankruptcy” because it wipes out most, if not all, of your unsecured debts. This fact, combined with the relatively short duration of a typical filing, motivates a lot of people to use Chapter 7 to get a fresh financial start.

There is a potential downside, however. The term “liquidation” applies to Chapter 7 because your nonexempt assets can be taken and sold by your trustee to satisfy creditors. Debtors who worry about losing property have the option of filing for Chapter 13 instead, which allows them to keep most assets by agreeing to a debt repayment plan.

If Chapter 13 is not an option for you due to debt amount or another reason, then there is still a way you can discharge those debts in a Chapter 7 bankruptcy and keep many important assets. It’s called the exemption system.

State vs. federal exemptions

There are two types of bankruptcy exemptions: state and federal. While most states require you to use state exemptions only, New York allows you to choose between the two. There is no mixing and matching, however. Once you select a system, you are limited to what it allows.

New York state exemptions include but are not limited to:

  • A homestead exemption valued at $82,775, $137,950, or $165,550, depending on your county of residence.
  • Personal property such as clothing, furniture, cooking utensils, books (up to $550), domestic animals (up to $1,100), and art and jewelry (up to $1,100). Personal property exemptions must total no more than $11,025 including limited annuity and tools of your trade.
  • Motor vehicle valued up to $4,425 or $11,025 if it has been designed for a disabled person.
  • Up to $8,275 in personal injury recoveries.
  • Savings up to $600.

There is also a wildcard exemption of $1,100 that you may apply personal property, cash holdings, or your bank account if you do not take advantage of the homestead exemption.

Federal exemptions, which are adjusted every three years during the month of April, allow you to keep $23,675 of equity in your primary residence. Other protections include:

  • Motor vehicles up to $3,775
  • Personal belongings collectively valued at up to $12,625
  • $1,600 worth of jewelry
  • Up to $2,375 for tools of the trade
  • Up to $23,675 for personal injury except for pecuniary loss or pain and suffering
  • A wildcard exemption of $1,250 plus up to $11,850 of any unused part of your homestead exemption

Which exemption you should go with depends on what assets you want to protect. If you want to keep your car, then New York state exemptions are more generous, while federal exemptions allow you to protect more personal property. When you are ready to file Chapter 7, a New York bankruptcy attorney can advise you as to which option will bring about maximum protection for your assets. Jayson Lutzky is a personal bankruptcy lawyer with 34 years of legal experience. He has helped many clients regain their financial footing and get a fresh start through Chapter 7 bankruptcy. To set up a free in-office consultation, call 718-514-6619. Saturday appointments are available. Visit to learn more.