When a person files for bankruptcy, there are many assets that can be taken away and some that the person can keep. In a Chapter 7 bankruptcy, under the homestead exemption, you may be able to keep your home if you own it and have made regular payments. In addition, public assistance benefits are consideredbankruptcy exemptions. This very fact is under discussion in a current New York bankruptcy case.
A 79-year-old widow from East Village, Manhattan, was forced to file for Chapter 7 bankruptcy in November 2011 after her husband died and left her with more than $20,000 in credit card debt. Her home, where she has lived since 1965, is a rent-stabilized co-op. She does not own her home, so after filing for bankruptcy, the property owner offered to buy out her lease instead of evicting her and her 50-year-old son.
The woman’s attorney put forth the idea that because the woman’s apartment could be considered public assistance, it cannot be taken from her in the bankruptcy. However, in April 2012, the bankruptcy court shot down this idea. The judge argued that rent-stabilized apartments have no income requirements and that the woman’s ability to rent one was based on good fortune.
The woman appealed and now the New York State Court of Appeals will have a verdict this fall. If the court sides with the woman, it will be an unprecedented ruling that will affect other bankruptcy filings in the state.
This example shows that when consumers file for bankruptcy, they may find ways to prevail and keep some of their beloved assets, such as homes. Although the law dictates which assets can be considered bankruptcy exemptions, sometimes there are loopholes.
Source: Habitat, “Unprecedented Ruling Due on Rent-Stabilized Apartments in Co-ops” Frank Lovece, May. 27, 2014by