When an individual files for bankruptcy, he or she may have to liquidate assets to pay off debt. While the liquidation process is an important part of bankruptcy, there are some assets that individuals need to have to survive. Fortunately, the New York bankruptcy code makes certain exemptions that allow individuals to retain ownership of specific assets.
State bankruptcy law allows individuals to retain ownership of certain life insurance and annuity contracts, along with any benefits that may come from those policies. However, annuities that were purchased within the six months prior to the individual filing for bankruptcy are not eligible. In addition, the annuity must meet certain criteria with the Internal Revenue Service to be eligible for exemption.
There are other types of property that are also exempt. An individual can retain ownership of a car as long as it does not have a value that exceeds $2,400 above the liens and encumbrances of the debtor. The person filing for bankruptcy may also retain ownership of any Social Security benefits to which he or she may be entitled. Finally, certain benefits, such as pensions, alimony, settlements, profit sharing plans and more are included in the list of eligible exemptions.
There are several different types of personal bankruptcy, and each has its own set of rules on how debts must be paid. An individual may wish to consult with an experienced bankruptcy attorney on how to proceed. The attorney could review a client’s debts and assets, discussing plans with that client regarding options for debt relief. The attorney could then recommend strategies dealing with the debt in the an effective manner.
Source: Findlaw, “NY Code – Debtor and Creditor“, December 22, 2014