The adoption of the federal exemptions in New York State is simply fantastic. As bankruptcy lawyers, we knew that it was going to eliminate most small chapter 7 asset cases. However, now I am starting to see just how versatile the federal exemptions really are!
Here are a few cases we are working on right now:
1. Client owns a remainder interest in his parents’ property. Both parents are still alive, and the actuarial value of the remainder interest is about $8,000. Using the wildcard exemption, this interest is totally exempt. Under the New York exemptions, this would have been a tough chapter 7 case because there is no way to know how much the trustee might settle for. So the client probably would have filed a chapter 13 to ensure that the remainder interest was preserved.
2. Client owns vacant land used for hunting. The value of the land is about $10,000, and the client has multiple judgment liens. Under prior law, the client could have filed chapter 7 without worrying too much about the trustee making a claim because the liens exceed the value of the property. However, using the federal exemptions, the client is not only able to protect the property, but also use Section 522 to avoid the judgment liens. He will be exiting the bankruptcy with both his home and land judgment free. The client was more than happy to pay a few hundred dollars extra for the 522 motion.
3. Client has a manufacturing business with specialized equipment worth about $50,000. He has IRS and NYS tax debt of about $30,000. After applying the federal exemption, his non-exempt equity is about $10,000. He happens to have significant unsecured debt (mostly student loans), so his chapter 13 case is dealing with the tax debt and paying unsecured creditors five cents on the dollar (the minimum in Buffalo). He is saving about $170 per month in his plan payment because of the federal exemptions.
These are just a few examples I was thinking about on the way to work today. I will start keeping track of these types of cases so I can post updates.