Bankruptcy Attorney New York: Chapter 7 vs 13, Exemptions & Means Test (2026)
🛡️ Confronting unmanageable debt, wage garnishment, or impending foreclosure in New York? This comprehensive guide details Chapter 7 versus Chapter 13 paths, the choice between New York State and federal exemptions, Means Test eligibility thresholds, and the four federal court districts across the state.
Navigating Debt Relief in the State of New York
New York’s high cost of living, from Manhattan rents to upstate medical bills, means unexpected job loss, illness, divorce, or business failure can push households into unsustainable debt quickly. Federal bankruptcy law offers a constitutional, lawful path to discharge debt entirely or restructure it into an affordable court-supervised plan.
Working with an experienced New York bankruptcy attorney is essential because New York is one of a small number of states that lets filers elect either the state exemption scheme or the federal exemption scheme — choosing incorrectly can mean losing assets that could otherwise have been protected.
Chapter 7 vs. Chapter 13: Choosing the Right Path
Chapter 7: Fresh Start Liquidation
Often called “straight bankruptcy,” Chapter 7 discharges qualifying unsecured debts (credit cards, medical bills, personal loans) in approximately 3 to 5 months. A court-appointed trustee reviews the petition to confirm non-exempt property is absent. In most consumer cases, all property is exempt, so debtors keep their home, car, and retirement accounts while eliminating burdensome debt.
- Discharges unsecured debts within 90–120 days
- Requires passing the New York Means Test
- No mandatory debt repayment plan
Chapter 13: Wage Earner Restructuring
Designed for individuals and sole proprietors with steady income whose earnings exceed Chapter 7 limits or who need to cure mortgage arrears. Chapter 13 establishes a 3- to 5-year court-supervised repayment plan, allowing homeowners to stop foreclosure auctions, catch up on missed mortgage payments, strip certain underwater junior liens, and pay a fraction of unsecured debt with the remainder discharged at plan completion.
- Curbs mortgage defaults and saves homes from foreclosure
- Consolidates obligations into one affordable monthly payment
- Protects non-exempt property that would otherwise be sold
New York State Exemptions vs. Federal Exemptions
New York is an “opt-out” state that additionally permits filers to elect the federal exemption scheme instead of the state scheme — a choice most states do not offer. Your attorney will calculate both to determine which protects more of your property:
New York State Exemptions (CPLR & Debtor & Creditor Law)
New York’s homestead exemption (Debtor & Creditor Law § 282) ranges from $92,500 in most upstate counties to $185,825 in New York City, Long Island, and Westchester — regularly adjusted for inflation. New York State exemptions also protect a defined amount of home equity, retirement accounts, and a modest motor vehicle exemption, but offer a smaller general wildcard than the federal scheme.
Federal Exemptions (11 U.S.C. § 522(d))
Renters, non-homeowners, or debtors with minimal home equity often prefer the federal scheme, which offers a smaller homestead exemption but a substantial “wildcard” provision (11 U.S.C. § 522(d)(5)) that can shield thousands of dollars in cash, bank accounts, or any other personal property, plus a dedicated motor vehicle exemption and tools-of-the-trade exemption.
Key New York Bankruptcy Statutes & Rules
| Statutory Element | New York Rule & Federal Code |
|---|---|
| Homestead Exemption (State) | Debtor & Creditor Law § 282: $92,500–$185,825 depending on county, inflation-indexed. |
| Federal Exemption Election | 11 U.S.C. § 522(b): New York filers may elect federal exemptions instead of state exemptions. |
| Wildcard Exemption (Federal) | 11 U.S.C. § 522(d)(5): unused homestead portion applied to any asset, cash, or deposits. |
| Motor Vehicle Exemption | Debtor & Creditor Law § 282(1): ~$4,825 (higher if vehicle is equipped for a disability). |
| The Automatic Stay | 11 U.S.C. § 362: Halts foreclosures, repossessions, lawsuits, and wage garnishments upon filing. |
| Means Testing Period | 11 U.S.C. § 707(b): 6-month historical median income comparison against New York census figures. |
| Mandatory Credit Counseling | 11 U.S.C. § 109(h): Briefing required within 180 days before filing from a UST-approved agency. |
Source: New York Civil Practice Law & Rules; New York Debtor & Creditor Law; U.S. Bankruptcy Code (Title 11). Figures reflect periodic inflation adjustments.
New York Federal Bankruptcy Court Districts
Bankruptcy is federal law, but hearings occur in one of four regional New York judicial districts. Your filing location depends on your county of residence:
Frequently Asked Questions: New York Bankruptcy
Should I use New York State exemptions or federal bankruptcy exemptions?
New York is an "opt-out" state that lets debtors choose between the New York State exemption scheme (CPLR § 5205, § 5206, and the NY Debtor & Creditor Law) or the federal bankruptcy exemptions under 11 U.S.C. § 522(d). New York’s state homestead exemption ranges from $92,500 to $185,825 depending on county (higher in the NYC metro, Long Island, and Westchester), which often exceeds the federal homestead amount. Renters or debtors with little home equity sometimes prefer the federal scheme for its larger "wildcard" exemption. Your attorney will run both calculations before you file.
How does the New York Means Test determine Chapter 7 eligibility?
The Means Test compares your household’s average gross income over the 6 months prior to filing against the New York median income for your household size. If your income is at or below the median, you automatically qualify for Chapter 7. If your income exceeds the median, a second calculation deducts IRS-allowed living expenses (housing, transportation, healthcare) to determine disposable income; if there is not enough disposable income to fund a meaningful Chapter 13 plan, Chapter 7 may still be available.
How does the Automatic Stay protect New York debtors?
Under 11 U.S.C. § 362, filing a bankruptcy petition in a New York federal bankruptcy court triggers an immediate injunction called the Automatic Stay. It stops creditor phone calls and letters, halts pending wage garnishments, freezes state court collection lawsuits, and pauses mortgage foreclosure sales and vehicle repossessions the moment the petition is filed.
Which New York federal bankruptcy court district handles my case?
New York has four federal bankruptcy court districts: the Southern District (Manhattan, Bronx, Westchester, Dutchess, Rockland, Putnam), the Eastern District (Brooklyn, Queens, Staten Island, Nassau, Suffolk), the Northern District (Albany, Syracuse, Utica), and the Western District (Buffalo, Rochester). Your petition must be filed in the district that covers your county of residence for the majority of the preceding 180 days.
Can taxes be discharged in a New York bankruptcy?
Income taxes owed to the IRS or the New York State Department of Taxation and Finance can be discharged in Chapter 7 or Chapter 13 if they satisfy the "3-2-240 rule": the return was due at least 3 years before filing, the return was actually filed at least 2 years before filing, the tax was assessed at least 240 days before filing, and there was no fraud or willful evasion. Trust fund taxes such as withheld payroll and sales tax are generally non-dischargeable.
What debts cannot be discharged in New York bankruptcy?
Non-dischargeable debts under the federal Bankruptcy Code include domestic support obligations (child support and alimony), most student loans absent a showing of undue hardship, criminal fines and restitution, debts from willful and malicious injury or DUI-related injuries, and debts obtained through fraud or false financial statements.
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