## How does Chapter 7 bankruptcy work in New York? Chapter 7 — "liquidation" bankruptcy — wipes out most unsecured debts (credit cards, medical bills, personal loans) in 3-6 months. In exchange, you have to surrender any non-exempt property to a trustee, who sells it to pay your creditors. The KEY question in a Chapter 7 case is: **what's exempt and what isn't?** Exempt property stays with you. The list of what's exempt is set by state law (and in some states, you can choose between state and federal exemption schemes). ### New York's exemption framework - **Homestead (your primary residence):** $179,975 / $299,625 / $89,975 / $149,825 depending on county (downstate counties = highest). - **Vehicle:** $4,825 (or $11,975 if equipped for disabled). - **Federal exemptions allowed?** Yes — debtors can choose either state or federal exemption schemes. **Worth knowing about New York:** NY homestead amounts vary by county — downstate (NYC + suburbs) gets the highest amounts. ## Are you eligible for Chapter 7? Chapter 7 has TWO main eligibility tests: **1. The Means Test.** If your household income is below the state median for your household size, you automatically qualify. If you're above median, the means test gets harder — it looks at disposable income after specific allowed expenses. **2. The Good-Faith Test.** Even if you pass the means test, the trustee or creditors can object if your filing looks abusive (large recent transfers, recent extravagant purchases, hidden assets). If you don't pass means-test, you may still file Chapter 13 — a reorganization with a 3-5 year payment plan. ## Common other exemptions Most states (and the federal scheme) include exemptions for: - **Retirement accounts** — 401(k), IRA, pension (most are fully exempt under federal ERISA + state law) - **Social Security and disability benefits** - **Tools of the trade** — typically $5,000-$15,000 of work-essential tools - **Household goods and furnishings** — usually a per-item or aggregate cap - **Clothing** - **Personal injury settlements** — often partially exempt - **Life insurance cash value** — varies - **Wildcard** — a flexible amount that can be applied to any property (helpful for items not specifically exempted) ## What's NOT discharged in Chapter 7 Chapter 7 wipes out most unsecured debts, but several types survive: - **Most student loans** (federal and many private) - **Recent income taxes** (older taxes may discharge — strict rules) - **Child support and alimony** - **Court fines and criminal restitution** - **Debts incurred by fraud** - **Personal injury debts caused by drunk driving** - **Domestic-relations property settlements** - **Some debts to government agencies** Secured debts (mortgage, car loan) don't "go away" — you have to either keep paying, surrender the collateral, or reaffirm. ## The 730/180-day rule for state exemptions If you've moved within the past 730 days (2 years), you may not be entitled to your current state's exemption scheme. Bankruptcy law looks back at where you lived during the 730 days before filing — if you lived in multiple states, the state where you lived for the largest portion of the 180-day period before that 730-day window controls. This rule prevents "forum shopping" to states with friendlier exemptions. ## Costs and timeline - **Filing fee:** $338 (federal); fee waivers available for very low-income filers - **Attorney fees:** typically $1,000-$2,500 for a straightforward Chapter 7 - **Credit-counseling certificate:** required pre-filing (typically $25-$50) - **Debtor education course:** required pre-discharge (typically $25-$50) - **Timeline:** 3-6 months from filing to discharge ## What you should do Bankruptcy is one of the few areas where DIY can backfire badly — wrong exemption claims or missed disclosures can convert a discharge case into a fraud case. New York bankruptcy attorneys typically charge flat fees that include the trustee meeting and any routine objections. Most offer free initial consultations to assess whether bankruptcy is the right tool. Non-profit credit-counseling agencies offer free pre-bankruptcy assessments too. --- *This guide is general information about New York law and federal bankruptcy law as of early 2026 and is not legal advice. Exemption amounts are typically indexed and update every 1-3 years. The 730-day domicile rule has many edge cases. Talk to a licensed New York bankruptcy attorney about your specific situation.*