New York State Says It's a "Good Bankruptcy Law"

Gov. David Paterson put New Yorkers first and the banking and debt collection industries second when he signed a bill that increases the value of property that people can retain when they declare bankruptcy or when creditors win judgments against them.

This sensible new law puts New York on a par with the rest of the nation. It allows people who hit hard times to keep at least the roof over their heads and the modest car that gets them to and from work.
New York already has a law that shields some debtor assets from creditors and bankruptcy trustees. But the actual dollar amounts in many provisions had not been updated since the 1980s, which means that the protections had seriously been eroded by inflation. Introduced by State Senator Eric Schneiderman, a Democrat of Manhattan, the new law increases the homestead exemption from $50,000 to either $75,000, $125,000 or $250,000, depending on the county of residence.

People who find themselves in deep financial trouble would also be able to keep one cellphone and one computer. The new law raises the value of an exempted automobile from $2,400 to $4,000 or $10,000 for a disabled debtor. The exemption would not apply in cases where the debt being enforced is for child support, spousal support, maintenance or alimony.

The Bloomberg administration argued that the automobile exemption would prevent them from towing some cars, which would make it impossible to collect outstanding traffic fines. The Senate responded by adding language that would void the exemption in cases where the municipality is the creditor. Members of the assembly have promised to do the same at the start of the next legislative session.
The new law will go a long way toward ensuring that bankruptcy or debt collection do not strip people of all they own, turning them into wards of the state.

A version of this editorial appeared in print on December 24, 2010, on page A22 of the New York edition.

Posted in Bloomberg , homestead exemption , New York Bankruptcy Law