Blog Topic

Bankruptcy exemption bill status: Mayor Bloomberg?s concerns satisfied
Posted by: Peter Scribner
August 30, 2010

As reported two weeks ago, the bankruptcy exemption bill, S. 7034, was passed by both houses of the legislature, but was being held up pending passage of a new bill, S. 8451, which exempts New York State and its municipalities from the new $4,000 judgment debtor car exemption.  

Why the new bill?  New York City Mayor Michael Bloomberg blasted the bankruptcy exemption bill in late July, fearing that parking scofflaws will no longer be worried that their car might be towed.  The mayor estimated that New York would lose $50 million in revenue and enforcement of parking scofflaws would come to a halt (see this New York Daily News article on the mayor?s reaction, July 26, 2010.)  

Political considerations may have had a part as well.  The New York State Senate sponsor of the bankruptcy exemption bill, Senator Eric Schneiderman, is a Democratic candidate for Attorney General, and Mayor Bloomberg is supporting a republican rival.

Apparently the issue was resolved quickly.  According to a Vos Iz Neias blog, the mayor blasted the bill at a news conference on the morning of July 26, hours after the Daily News article was posted.  The Daily News then reported that, by that afternoon, the Mayor and Senator Schneiderman had settled their differences and  issued this statement:

?We are pleased to report that we have reached agreement on a chapter amendment to the legislation that ensures the City?s successful scofflaw towing program will remain intact. The chapter amendment will be introduced today and taken up by the Senate when it next considers legislative items. The underlying bill will not be sent to the Governor until this issue has been resolved.?

Since then the Senate passed the new bill limiting the vehicle exemption (S. 7034, introduced July 26 and passed Aug. 3) and Assemblywoman Helene Weinstein, the long-time Assembly sponsor of the bill to update bankruptcy exemptions, has introduced the measure in the Assembly (A.11677.) The Assembly must meet before the bill can be passed, and, as of today, nobody knows when the Assembly will meet next in this, an election year.  I understand that the Assembly is now, as a legal matter, ?at the call of the Speaker', and it is quite possible it may be called back into session before the election.

Assuming the new bill regarding the car exemption is passed by the Assembly, both bills will be sent to the Governor for action, either for passage or veto.  The position of the Governor on the issue is unknown. Supporters of the bankruptcy exemption bill are encouraged to write to the Governor?s office and submit their comments. 

Permalink

Status of Bankruptcy exemption bill, as of August 18, 2010
Posted by: Peter Scribner
August 18, 2010

As previously reported, both the New York State Assembly and the Senate have passed S. 7034, a bill that updates and modernizes bankruptcy exemptions. The bill has not yet been submitted to the Governor for signature. According to a person in the office of Senator Eric T. Schneiderman, the Senate sponsor for the bill, a companion bill, S. 8451, must pass the Assembly so that both can be submitted to the Governor together.

 S. 8451 excludes the State of New York or its agencies or municipalities, if they are a judgment creditor, from the new $4,000 car equity exemption. S. 8451 was passed by the Senate on August 3, and has been sent to the Assembly. We will be looking for Assembly action once the Assembly returns for a session.

S. 7034 amends CPLR 5205(a)(8) to read ?one motor vehicle not exceeding four thousand dollars in value above liens and encumbrances of the debtor; if such vehicle has been equipped for use by a disabled debtor, then ten thousand dollars in value above liens and encumbrances of the debtor; provided, however, that this exemption for one motor vehicle shall not apply if the debt enforced is for child support, spousal support, maintenance, alimony or equitable distribution, or if the state of New York?

S. 8451 adds to the end of this section: ?or any of its agencies or any municipal corporation is the judgment creditor?

Permalink

A (Brief) history of New York exemptions, Part II
Posted by: Peter Scribner
August 13, 2010

This is a continuation of my first blog on the history of New York bankruptcy and judgment debtor exemptions, which went up to the exemption statutes through 1824, which were brought together into one section when New Uork consolidated its statutes in 1829.

The original exemption statute was very specific in the household goods that could be exempted (six knifes and forks, one teapot etc.), and the mechanic could exempt $25 in tools of the trade. In 1842, an additional, somewhat overlapping exemption was enacted, protecting an interest in "necessary household furniture and working tools and team" to a value of $150.00, but not against a purchase money claim.  The 1829 consolidated exemptions were available only for a "householder"; this 1842 exemption was for a householder or a person "having a family for which he provides."  laws of 1842, p. 193, Chap. 157.

The homestead exemption, a major exemption for a debtor's residence, was added in 1850, at a value of $1,000 (laws of 1850, Chap. 260; sect. 1 & 2). As originally drafted, it was only available to a "householder having a family" and had to be designated as a homestead in a recorded document in the county clerk's office. $1,000 could buy you some house in 1850; not so much a hundred years later.  The $1,000 homestead exemption remained unchanged for 119 years, finally doubling to $2,000 in 1969.  Laws of 1969, Ch. 961.  Eight years later, the exemption increased again, to $10,000, and the requirement to record a homestead designation was eliminated.  Laws of 1977, Ch. 181.  The exemption increased to $50,000 in 2005, and the proposed law increases it significantly again, up to $150,000 in New York City, Long Island, and three counties north of New York, $100,000 for the Hudson Valley and Albany, and $75,000 for the rest of the state.

Even before the homestead exemption was created, a family burying ground was added as exempt, in 1847 (Laws of 1847, Chap. 85, sect. 1.)  This exemption is still with us.

In 1864, at the height of the Civil War, the "pay and bounty" and pension of enlisted soldiers and non-commissioned officers was exempted. Laws of 1864 Chap. 578, sections 4 & 5.

Around 1876, New York's statutes were recompiled, and the cumbersome Revised Statutes of 1829 (where exemptions were located at "Part III, Chapter VI, Title 5, Article 2, Section 22, Subsections 1-6") were replaced by the Code of Civil Procedure (CCP).  Exemptions were located at CCP Sections 1389 through 1404.  The six exemptions listed in the 1829 statute (set out and compared to modern statutes at the end of the first blog)  (now CPLR Sect. 5205) were located in CCP 1390; the limited catch-all household goods and tools exemption created in 1842 was located at CCP Sect. 1391, increased to $250.  The Homestead exemption was at CCP Sect. 1397. 

In 1903, CCP Section 1391 was amended to allow certain creditors to execute on 10% of a debtor's wages or trust fund income, if it exceeded $20 per week.  As originally drafted, the income execution was only available to creditors who had sold "necessaries" to the debtor, or performed work for the debtor as a domestic or a salaried employee. laws of 1903, Chap. 461.  The limitations on the type of judgment creditor who could execute on wages was eliminated five years later.  Laws of 1908, Chap. 148.

After World War I, New York's statutes were recompiled again, and exemptions were located in the new Civil Practices Act at CPA Sections 664 - 679.  The old six household exemptions were located at CPA Section 665.  The tools of the trade for a mechanic in CPA Section 665 (6) (formally CCP 1390(6) was increased to $100, and the catch-all exemption for household furnishings and tools, enacted in 1842, was placed as sub-section 7 of CPA Section 665. In effect there were two tools of the trade exemptions; $100 in CPA 665 (6) and $250 in CPA 665(7).  

In 1942, CPA Sect 665 had a new sub-section added, 6A, exemption "a wedding ring; a watch not exceeding in value thirty-five dollars."  Laws of 1942, Chap. 311. 

In 1946, the basic household exemptions of CPA 665, sub-sections 4-6, were greatly revised and updated, essentially creating the language found in the current CPLR Sect. 5205.  Gone was the ten sheep and their fleeces etc., replaced with a domestic animals exemption of $450.  Gone were the six knifes and forks etc., replaced with "household furniture, crockery, tableware and cooking utensils".  The two overlapping tools of the trade exemptions were replaced by a single $450 exemption.  Laws of 1946, Chap. 135.  

The Civil Practices Act was replaced by the Civil Practice Law and Rules in 1962, but the exemptions, found in CPLR Sections 5205 and 5206, were not changed.

In 1877, a "married woman" was permitted to claim a homestead exemption.  CCP Sect. 1398. That same year, women (married or otherwise) became entitled to all the personal property exemptions a householder qualified for in CCP 1390 and 1391 (CCP Sect. 1392.)  The original 1877 statute states that women are entitled "to the same exemptions, as prescribed in the last two sections, in the case of a householder."  It was unclear if that last phrase meant that the woman had to be a householder or if that last phrase merely indicated that the preceding two exemption sections applied to householders.  When the Civil Practices Act replaced the Code of Civil Procedures, each section was titled, and this section (CPA Section 666) was titled "Women's exemption as householder."

Not until 1946 was the provision changed to clearly state that women did not have to be householders to claim these exemptions.  Laws of 1946, Chap. 135. And by the same 1946 statute, women did not have to be married to claim the homestead exemption.  That statute also allowed men who were not householders to claim some exemptions for the first time, limited to the church pew, wearing apparel, wedding ring and watch, and a $250 tools of the trade exemptions.

In 1957, the tools of the trade exemption for householders and women was increased to $600 and for male non-householders to $450. (Laws of 1957, Chap. 512.)  The whole tedious householder-nonhouseholder-women differentiation was finally eliminated in the Bicentennial Year.  Laws of 1976, Ch. 129, Section 1.

Technology always seems to lag in New York exemptions.  In 1860, a sewing machine, fuel, oil, candles and candle sticks were added to the basic household exemptions.  Laws of 1860, Chap. 152. A "mechanical, gas or electric refrigerator" and a "radio receiver" was added in 1957 (laws of 1957, Chap. 412). Continuing this pattern of exemption new household devices decades after their introduction, a television were added to the exemptions in 1976. Laws of 1976, Ch. 697, Section 1. Home computers and cell phones are only be added by the legislature with the 2010 proposed exemption bill.

Permalink

A (Brief) history of New York exemptions, Part I
Posted by: Peter Scribner
July 27, 2010

A review of New York exemption statutes 1784 to 1824; Many of our current exemptions date back to this era.

Continue Reading

Bankruptcy exemption expansion passes New York legislature, awaits Governor's signature
Posted by: Peter Scribner
July 06, 2010

Both the New York Assembly and Senate have passed Bill S. 7034, which expands New York's bankruptcy and judgment debtor asset exemptions.  The bill must be signed by the governor; it will then be effective thirty days later. Highlights of the changes are:

1) Motor vehicle exemption increased to $4,000, and available to both bankruptcy and non-bankruptcy judgment debtors;

2) Household goods exemption for bankruptcy debtors doubled to $10,000, and the cash exemption (alternative to homestead exemption) for bankruptcy debtors doubled to $5,000;

3) Family library exemption increased to $500;

4) Domestic animals exemption increased to $1,000;

5) Computer, cell phone and health aids added to list of necessary household goods;

6) The $35 watch exemption changed to a $1,000 watch, jewelry and art exemption;

7) Tools of the trade exemption increased to $3,000;

8) For a debtor not using a homestead exemption, a $1,000 catch-all exemption;

9) Increase in homestead exemption: for New York, Long Island, and the Lower Hudson Valley: $150,000; for the Upper Hudson Valley and Albany: $100,000; for the rest of New York: $75,000.

10) All dollar amounts in CPLR 5205 and 5206, and Debtor & Creditor 282 and 283. will be adjusted for inflation every three years, starting April 2012.

11) Bankruptcy debtor may opt to use the federal exemption of Bankruptcy code section 522 rather than the New York exemptions.

For historical perspective, I am posting a separateblog on the history of New York exemptions.

The following is the text of the official legislative bill memorandum that accompanies S. 7034:

TITLE OF BILL: An act to amend the civil practice law and rules, in relation to increasing the property values which are exempt from the satisfaction of a money judgment; and to amend the debtor and creditor law, in relation to increasing the exemptions in bankruptcy

PURPOSE OF BILL: Increases the amount of exemptions in bankruptcy proceedings, money judgments, provides a choice between the state and federal exemptions and institutes a COLA for these amounts.

SUMMARY OF PROVISIONS OF BILL: This bill would increase the level of certain exemptions from the satisfaction of a money judgment. In addition to the increases, it would add one computer, one cell phone and one motor vehicle worth up to $4,000 to the list. If such vehicle was equipped for use by a disabled person, the limit would be $10,000. The money judgment exemption for the motor vehicle would not apply if the debt enforced is for child support, spousal support, maintenance, alimony or equitable distribution. It would increase the homestead exemption value of a home under Section 5206 of the CPLR from $50,000 to:
$150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; $75,000 for the remaining counties in the state.

It would amend Subdivision 1 of Section 282 of the Debtor and Creditor Law to increase from $2,400 to $4,000 the exemption for one motor vehicle in bankruptcy. If such vehicle was equipped for use by a disabled person, the limit would be $10,000 in bankruptcy. The bill would amend section 283 of the debtor and creditor law to increase the amount of the aggregate individual bankruptcy exemption from $5,000 to $10,000.

The bill would add a new section 285 to the Debtor and Creditor Law to permit debtors to choose either the current federal exemptions or the exemptions in New York Law. The New York State exemptions are listed in Debtor Creditor Law Art 10-A, Sections 282 and 283. Federal exemptions are enumerated in 11 U.S.C. 522(d). It will apply a Cost of Living djustment to be published by the New York Banking Department for the applicable exemptions in sections 5205 and 5206 of the CPLR and Section 282 and 283 of the Debtor and Creditor Law.

JUSTIFICATION: The purpose of the Homestead Act is to allow a debtor to keep enough property and money exempt from the satisfaction of a money judgment to continue to live without becoming a ward of the State. The current levels of the exemptions from the satisfaction of a money judgment in the Homestead Act have been eroded by inflation to be almost meaningless. This bill sets realistic limits that reflect today's values and brings New York into accord with other states.

In 1982 the Federal government amended the bankruptcy law to provide states with the power to modify certain aspects of their bankruptcy law, such as the dollar value of property exempt in bankruptcy proceedings.

New York opted to set its own dollar amounts. In 1995 the United States Bankruptcy Code was amended to double all the property exemptions on the Federal level to adjust for inflation and to institute a COLA to prevent future erosion. These changes did not affect New York because we had opted out of the Federal exemptions. It is time for New York to take similar action.

In New York, as in most states, bankruptcy exemptions include the personal property which is exempt from the satisfaction of a money judgment. However, New York permits one motor vehicle worth up to $2,400 above liens and encumbrances to be exempt in bankruptcy but it is not exempt from the satisfaction of a money judgment. This bill will remedy that inequity by making one motor vehicle exempt from the satisfaction of a money judgment and increasing the dollar amount to $4,000 to account for inflation. However, if that vehicle has been equipped for use by a disabled debtor, the dollar limit will be $10,000.

These property values are consistent with the values used by other states. Specifically:

Personal Property: Many states have wildcards which apply to any personal property - for example Texas $30,000 per person or $60,000 per household. Thus many states carry higher exemptions which take a generic form. Specifically:

1. This bill will increase the value of books [and religious texts] from $50 to $500:

States with same/higher limits for books and religious texts which are exempt from the satisfaction of a money judgment include Colorado [$1,500], Hawaii [no limit], Iowa [$1,000], Louisiana [no limit], Minnesota [no limit], New Hampshire [$800], North Dakota [$1,500], Oklahoma [no limit], Oregon [$600], and Washington [1,500].

2. Domestic Animals and Food from $450 to $1,000:

States with same/higher limits include Alaska [$1,250], Colorado [$50,000 includes farm equipment and tools too], Louisiana [no limit], and Virginia [no limit].

3. One watch from $35 to $1,000 with jewelry and art added to the category:

Jewelry is exempt under the federal bankruptcy guidelines to $1,350. States with same/higher limits include: Arizona [$1,000 jewelry], Alaska [$1,250 jewelry], California [$6,750 jewelry and art], Colorado [$2,000 jewelry], Idaho [$1,000 jewelry], Iowa [$2,000 jewelry], Kansas [$1,000 jewelry], Maine [watch - no limit], New Mexico [$2,500 jewelry], Rhode Island [$1,000 jewelry].

4. Tools of trade from $600 to $3,000.

Federal bankruptcy guidelines are $2,025. States with same/higher limits include: Alaska [$3,500], California [$6,750], Colorado [$20,000], Georgia [$5,000], Hawaii [no limit], Iowa [$10,000], Kansas [$7,500], Louisiana [no limit], Maine [$5,000], Maryland [$5,000], Minnesota [$10,000], Mississippi [$10,000], Missouri [$5,000], Montana [$3,000], Nevada [$10,000], New Hampshire [$5,000], Oklahoma [$10,000], Oregon [$3,000], Utah [$3,500], Vermont [$5,000], Virginia [$10,000], Washington [$5,000], Wisconsin [$5,000],

5. Motor vehicle from $0 to $4,000 and from $0 to $10,000 for disabled equipped vehicle [current law is $2,400 bankruptcy only].

Federal bankruptcy guidelines are $3,225. States with same/higher include: Arizona [$5,000 & $10,000 disabled], Colorado [$5,000 & $10,000 disabled], Iowa [$7,000], Kansas [$20,000 & no limit if disabled], Louisiana [$7,500], Maine [$5,000], Minnesota [$4,000 & $40,000 disabled], Nevada [$15,000 no limit disabled], New Hampshire [$4,000], New Mexico [$4,000]; North Dakota [$32,000 if disabled], Oklahoma [$7,500], Rhode Island [$10,000].

6. Wildcard on personal property/bank account/cash if no homestead exemption claimed from $0 to $1,000:

Federal bankruptcy guidelines adds $2,175 if no homestead. States with same/higher include: Arizona [$1,000 or 1.5 months rent], Florida [adds $3,000 if no homestead]; Iowa [$1,000 cash or bank account]; Maine [adds $6,000 if no homestead], New Hampshire [$1,000 wildcard adds $7,000 unused exemptions], North Carolina [adds $5,000 if no homestead]; North akota [adds $7,500 if no homestead], South Carolina [adds $5,000 if no homestead], Wisconsin [$1,000 bank account/cash].

The value of real property which is exempt from the satisfaction of a money judgment was increased in 2005 from a paltry $10,000 to $50,000. That increase, while long overdue, did not lift the exemption to a level comparable to many other states with similar property values nor did it account for the divergent property values across New York. This bill would increase the homestead exemption from $50,000 to $150,000 for the counties of Kings, New York, Queens, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam; $125,000 for the counties of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster; and $75,000 for the emaining counties in the state. States with higher limits include:

Federal bankruptcy exemption is $20,200. States with same/higher include: California [$50,000 - $150,000], Connecticut [$75,000 - $125,000], Florida [no limit], Idaho [$100,000], Iowa [no limit], Kansas [no limit], Massachusetts [$500,000], Minnesota [$750,000 farms,
$300,000 homes], Montana [$250,000], Nevada [$550,000], Rhode Island [$300,000], South Dakota [no limit], Texas [no limit], Washington [$125,000].

Since the 1995 adjustments to the Federal exemptions, a Cost of Living Adjustment [COLA] has prevented erosion due to inflation. We have seen how static values in the New York exemptions were eroded by inflation.

This bill institutes a COLA to ensure that these exemptions - like their Federal counterparts - are never again eroded by the passage of time. This COLA will be published by the New York State Banking Department which already publishes a COLA for other money judgment purposes [see CPLR 5205]. The COLA will be applicable to both the personal and real roperty which is exempt from the satisfaction of a money judgment and to the applicable exemptions in bankruptcy.

Finally, another 1995 amendment to the United States Bankruptcy Code permitted states to have the option to choose either their states' or the Federal exemptions providing their State law permitted it. This bill would give New Yorkers the option to choose between the two by making such an amendment. It will be a new section 285 to the Debtor and Creditor Law.

FISCAL IMPLICATIONS FOR STATE AND LOCAL GOVERNMENTS: Undetermined.

EFFECTIVE DATE: Thirty days after becoming law.

Permalink

Bankruptcy Exemption may expand in NY - an historical perspective
Posted by: Peter Scribner
June 29, 2010

As New York moves close to a major revision of exemptions available to bankruptcy and judgment debtors, a review of the history of New York exemptions shows that most have not been updated in decades.  ?Exemptions? refer to the property a person who has been sued, or a person who has filed bankruptcy, can keep free and clear of his or her creditors. As of today, June 29, 2010, the New York State Senate has passed S. 7034, a bill to expand New York exemptions and index them for inflation.  If passed by the Assembly (considered likely) and signed by the Governor (more uncertain), the changes would go into effect thirty days later.

Some assets are exempt in New York no matter what their value (example: a wedding ring; retirement accounts.)  Most exemptions, however, have a dollar limit in value, and, with one exception, these dollar limits have not been adjusted in decades.  For example, a bankruptcy debtor can exempt $2,400 in equity in a car and, if not claiming a homestead exemption for their residence, $2,500 in cash.  These two amounts have not been raised since they were originally enacted in 1982, twenty-eight years ago.  The pending legislation increases the car exemption to $4,000 and the cash exemption to $5,000.

Working debtors can exempt ?tools of the trade? up to a value of $600, an amount that has not changed in fifty-three years (1957.)  The proposed bill increases this to $3,000.  Debtors may exempt a watch valued up to $35, an amount set when the exemption was created in 1942 and unchanged ever since.  Putting aside the fact that watches are increasingly rare except as fashion items, the new legislation broadens the exemption to include a watch, jewelry and art up to $1,000.

The longest-running unchanged exemption is for books: the ?family bible?, family pictures, and school books of debtor?s family of such person, and $50 worth of books kept for the family library.  This $50 exemption amount dates back to at least 1842, unchanged since John Tyler was President.  The proposed legislation changes the ?family bible? to ?religious texts? and increases the exemption to $500.

Many of New York?s exemptions are only updated versions of property considered necessary in nineteenth century rural America.  One current exemption is for stoves and sewing machines.  This exemption originally protected ?spinning-wheels, weaving-looms, and stoves?.  The current household goods exemption was once far more itemized: ?All necessary wearing apparel, beds, bedsteads and bedding, ... necessary cooking utensils, one table, six chairs, six knives and forks, six plates, six tea-cups and saucers, one sugar-dish, one milk-pot, one teapot and six spoons one crane and its appendages, one pair of andirons and a shovel and tongs.? That pre-Civil War list of necessities was not simplified until 1946.  And the current exemption for domestic animals was, for a long time, quite specific: ?All sheep to the number of ten, with their fleeces, and the yarn or clothe manufactured from the same, one cow, two swine? and the necessary food for them.

The one exemption that has been updated regularly in recent years is the homestead exemption, protecting equity in a debtor?s residence.  In 1850, this exemption was set at $1,000, a figure that did not rise for a hundred and nineteen years, to $2,000 in 1969, then 10,000 in 1977, and $50,000 in 2005.  The proposed bill increases the amount to $150,000 for New York City, Long Island and the Lower Hudson, $100,000 for the Upper Hudson area and Albany, and $75,000 for the rest of the state, including all of Western New York.  Considering how much of a house a thousand dollars could buy you in 1850, the increase seems appropriate.

The proposed bill also allows New York bankruptcy debtors to claim federal exemption as an alternative to New York exemptions, and I will write more about that if and when the bill is passed.

Permalink