• Adrienne Woods, Esq.

I’m Filing for Chapter 7 Bankruptcy – What Can I Keep?

You may be surprised at what you can keep!

There are many misconceptions surrounding what debtors get to keep when they file for chapter 7 bankruptcy.


Among the terrifying misconceptions that cause people to delay filing for bankruptcy protection is the mistaken belief that, if they file for bankruptcy, they will lose everything. I remember one older lady asking if the court would take her pet cat. While this is an extreme example, other clients have feared losing possessions ranging from rent-stabilized apartments to cars needed for work. Fear not – many people who file for bankruptcy under chapter 7 get to keep most – if not all – of their possessions!

When a person files for bankruptcy, almost all of their property becomes “property of the estate” under section 541 of the Bankruptcy Code. This includes all legal and equitable interests of the debtor, which can range from cars and clothing to stocks and trademarks. In some cases, property the debtor obtains after they file for bankruptcy – such as property inherited within 180 days after they file – also becomes property of the estate! Even a debtor’s right to sue another person or business becomes part of the bankruptcy estate, so it’s easy to see why people might be concerned about losing everything in the process.


Because bankruptcy is meant to provide a “fresh start,” the Bankruptcy Code recognizes that the debtor cannot be left destitute. Accordingly, section 541 excludes some specific items from the debtor’s estate – meaning the debtor may keep them. For instance, if a debtor placed money in an education individual retirement account more than 365 days before filing for bankruptcy, those funds may be exempt. Amounts received or withheld by employers for contribution to certain ERISA-qualified retirement plans, annuities, or health insurance plans are generally also exempt.


In addition to the items that are not included in property of the estate, individual debtors – as opposed to business debtors – also get to “claim” certain exemptions provided under section 522 of the Bankruptcy Code as well as New York State Law. A good lawyer will consider your assets and available exemptions to help you determine whether bankruptcy will benefit you. They will also assess whether to use the Federal or New York State exemption scheme to ensure you are able to keep as much of your property as is possible. A debtor who chooses the wrong exemptions risks loss of substantial assets. For instance, under the Federal scheme, a debtor is entitled to a homestead exemption of about $25,000. Under the New York State exemptions, on the other hand, depending on the county where they file, a debtor may be able to protect more than $165,000 of equity in their primary residence! Obviously, election of the correct exemptions is critical to a successful fresh start.

Exemptions are one reason why it is critical to consult with qualified counsel when considering filing for bankruptcy. If you are considering filing for bankruptcy and want to maximize the assets you get to keep, call me today for a free consultation.


Call the Law Offices of Adrienne Woods, P.C. today for a free consultation to see if bankruptcy might be right for you. (917) 447-4321


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