New York Bankruptcy Law: What Assets Can You Keep in 2026?

New York bankruptcy law gives you more protection than most people expect. If you’re buried in debt and thinking about filing, the first question most people ask is: “Will I lose everything?” The short answer is no — and in New York, you may actually be able to protect quite a bit.

When you file for bankruptcy, you don’t hand over all your belongings to a trustee and walk away with nothing. The law gives you something called exemptions — specific categories of assets that creditors cannot touch. New York has some of the most debtor-friendly exemption laws in the country, and understanding them before you file can make a serious difference in what you get to keep.

This guide breaks down exactly what the New York bankruptcy exemption system looks like in 2026, including updated dollar amounts, the difference between Chapter 7 and Chapter 13 bankruptcy, and how to choose between state and federal exemption lists. Whether you own a home in Brooklyn, drive a car upstate, or have a retirement account you’ve been building for decades, this article walks you through what the law protects — and what it doesn’t.

This is not legal advice. Every situation is different, and for anything involving real money and real assets, talking to a licensed New York bankruptcy law attorney is worth every dollar.

What Are Bankruptcy Exemptions and Why Do They Matter?

When you file for bankruptcy in New York, a court-appointed trustee takes a close look at everything you own. Their job in a Chapter 7 case is to find assets they can sell to repay your creditors. But they can only sell what isn’t protected by an exemption.

Bankruptcy exemptions are essentially a legal shield. They define the categories and dollar amounts of property that are off-limits during the bankruptcy process. Think of them as a floor — a baseline that creditors and trustees cannot reach below.

Here’s the basic mechanics of how this plays out in practice:

• You list all your assets when you file your bankruptcy petition
• You “claim” exemptions for any asset you believe is legally protected
• The trustee reviews your claims and either accepts them or challenges them
• Assets not covered by an exemption become part of the bankruptcy estate, which can be liquidated in Chapter 7
• In Chapter 13, non-exempt assets don’t get sold, but their value determines how much you must repay creditors through your repayment plan

The key point: New York bankruptcy law exemptions are not automatic protections unless you claim them. You have to assert them in your filing, and doing it correctly matters.

New York State vs. Federal Bankruptcy Exemptions — Which Should You Choose?

One of the most important decisions you’ll make when filing for bankruptcy in New York is choosing between two sets of exemption rules: the New York state exemptions or the federal bankruptcy exemptions under 11 U.S.C. § 522.

New York is one of the states that gives debtors this choice. You can pick whichever set gives you better protection — but here’s the catch: you cannot mix and match. You pick one complete system and apply it across the board.

When New York State Exemptions Are Better

For most New York bankruptcy law filers, especially homeowners, the state exemptions win. The main reason is the homestead exemption. New York’s state homestead exemption is substantially more generous than the federal one, particularly in high-cost areas like the New York City metro region.

If you have significant home equity, you’ll almost certainly want to use the New York state exemption system.

When Federal Bankruptcy Exemptions Are Better

The federal system has its own advantages, particularly for people who don’t own a home or have minimal equity in one. The federal exemption list includes a wildcard exemption of up to $1,475, plus the ability to use up to $13,950 of any unused homestead exemption on any property you choose. That flexibility can be valuable if your assets don’t fit neatly into New York’s categories.

People who rent rather than own, or those who have significant personal property spread across multiple categories, may find the federal exemptions more protective.

The bottom line: Run the numbers for both systems before you file. A bankruptcy attorney can help you model out which option preserves more of your assets.

New York Bankruptcy Law 2026 — The Complete Exemption Breakdown

Here is a detailed look at what New York bankruptcy exemptions cover in 2026. Note that some figures are subject to periodic adjustment (typically every three years), so always confirm current numbers with legal counsel or official New York statutes before filing.

Homestead Exemption — Protecting Your Home

The New York homestead exemption is the crown jewel of the state’s exemption system. Under N.Y. Civil Practice Law and Rules § 5206, you can protect the following amounts of equity in your primary residence — including a house, condominium, co-op, or mobile home:

• $204,825 — for residents of Kings, Queens, New York, Bronx, Richmond, Nassau, Suffolk, Rockland, Westchester, and Putnam counties
• $170,700 — for residents of Dutchess, Albany, Columbia, Orange, Saratoga, and Ulster counties
• $82,775 — for all remaining counties in the state

Married couples who co-own the home can each claim the full exemption amount, effectively doubling the protection.

A few important conditions apply. To use the New York homestead exemption fully, you must have lived in the property as your principal residence. If the home is a second property or investment property, it does not qualify. Additionally, if you file within 40 months of purchasing the property using proceeds from selling a home in another state, your exemption may be capped.

Why this matters: New York real estate values are high. The generous homestead exemption means that many homeowners in the five boroughs or Long Island can protect the majority of — or in some cases all of — their home equity when they file.

Motor Vehicle Exemption — Can You Keep Your Car?

Yes, in most cases. New York bankruptcy law allows you to protect up to $4,825 in equity in one motor vehicle under the standard exemption rules. Under the Debtor and Creditor Law, this amount rises to $5,500.

If you have a disability and your vehicle is specially equipped to accommodate it, the exemption jumps to $13,625 — recognizing that a modified vehicle is often an essential medical accommodation, not a luxury.

Here’s how the car exemption works in practical terms: if you own a car outright that’s worth $4,000, the entire value is protected. If you owe $15,000 on a car worth $20,000, your equity is only $5,000 — which falls within the exemption range.

If your vehicle has equity that exceeds the exemption cap, the trustee can sell it, pay you the exempt amount in cash, and distribute the rest to creditors. In practice, trustees often skip assets with only a few thousand dollars of non-exempt value because the cost of liquidation eats into the proceeds.

Retirement Accounts — Almost Fully Protected

This is the good news most people need to hear. Retirement savings — including 401(k) plans, IRAs, 403(b) plans, pension plans, and most other tax-exempt retirement accounts — are broadly protected under both New York state law and federal ERISA rules.

Under New York law, most employer-sponsored retirement plans are fully exempt from the bankruptcy estate. IRAs and Roth IRAs are protected up to approximately $1,512,350 per person under federal bankruptcy law (this amount adjusts for inflation every three years). For most working New Yorkers, this means their retirement savings are completely untouchable in bankruptcy.

This is one of the reasons bankruptcy attorneys often advise people not to raid their retirement accounts to pay off debt before filing. If you drain your 401(k) trying to avoid bankruptcy and then end up filing anyway, you’ve lost fully protected money.

Personal Property Exemptions — The Everyday Essentials

New York Civil Practice Law and Rules § 5205 and Debtor and Creditor Law §§ 282–283 protect a wide range of household property. Here’s what you can keep regardless of value:

• All clothing and household furnishings
• One refrigerator, one radio, one television, one computer, and one cell phone
• Stoves and home heating equipment, plus 120 days’ worth of fuel
• Kitchenware and cooking equipment
• Your wedding ring and watch
• Jewelry (up to $1,175)
• Religious texts and family pictures
• Prescribed health aids and medical equipment
• Service animals and related accessories
• Military uniforms, arms, and equipment if actively serving

The aggregate personal property exemption under New York state law is $13,625. This means the combined value of all personal property items you claim cannot exceed that threshold for the exemption to cover them fully.

Cash, Bank Accounts, and the Wildcard Exemption

New York’s cash exemption is structured in a way that requires some planning. Under the Debtor and Creditor Law, you can protect up to $6,000 in cash — including currency, savings bonds, bank deposits, and tax refunds not yet received — but only if you are not claiming the homestead exemption.

The two cannot be stacked. If you own a home and need the homestead protection, you lose the cash exemption. This is a critical trade-off that catches many filers off guard.

New York also provides a modest wildcard exemption of $1,175, which you can apply to any property of your choosing that doesn’t fit neatly into another category. The federal wildcard exemption can be significantly more flexible for people without much home equity.

Wages and Income Protections

New York bankruptcy law protects a significant portion of your earned wages. Under state law, 90% of income earned within 60 days before filing is exempt from the bankruptcy estate. In some cases — particularly for lower-income debtors — 100% of wages may be protected.

Additionally, the following income sources are fully exempt in New York bankruptcy:

• Social Security benefits
• Unemployment compensation
• Veterans’ benefits
• Workers’ compensation
• Public assistance and welfare payments
• Disability payments
• Child support and alimony payments (when the recipient is dependent on them)
• Crime victims’ compensation
• Personal injury awards up to $10,250

These income exemptions are broad because the law recognizes that stripping someone of income needed for basic survival defeats the entire purpose of the fresh start that bankruptcy is supposed to provide.

Tools of the Trade

If your livelihood depends on equipment or tools — whether you’re a contractor, musician, chef, or any other professional — New York bankruptcy law protects up to $3,575 in tools of the trade. This applies to equipment, books, instruments, and other professional items necessary for your work.

Note that professional musicians have a specific provision: instruments are protected as tools of the trade up to this limit. A high-value instrument may still be at risk if it exceeds the threshold, though the trustee would have to weigh whether liquidating it is worthwhile.

Life Insurance and Annuities

New York provides solid protection for life insurance policies and annuity contracts. Cash surrender values in insurance policies are exempt when the insured is you or someone you depend on financially. Annuity contracts are protected up to $5,000 per year in benefits received.

Group life insurance policies and disability payments through insurance are also fully protected under the Debtor and Creditor Law.

Chapter 7 vs. Chapter 13 Bankruptcy in New York — What’s the Difference?

The exemptions above apply most directly to Chapter 7 bankruptcy, which is a liquidation process. Understanding both types of bankruptcy is essential to figuring out which path is right for you.

Chapter 7 Bankruptcy in New York

Chapter 7 is the faster option — typically completed in four to six months. A trustee reviews your assets, sells any non-exempt property, and distributes proceeds to creditors. At the end of the process, most of your remaining dischargeable debts are wiped out.

To qualify for Chapter 7, you must pass the means test — a formula that compares your income to the New York state median income. If your income is below the median, you automatically qualify. If it’s above, you go through a more detailed calculation.

The New York median income for a single-person household is approximately $74,000-$78,000 (verify current figures with the U.S. Trustee Program before filing). For a family of four, this rises significantly.

Chapter 13 Bankruptcy in New York

Chapter 13 is a reorganization bankruptcy. Instead of liquidating assets, you propose a repayment plan lasting three to five years, during which you pay back some or all of your debts from your disposable income.

The major advantage of Chapter 13 is that you keep all your property — even assets that would not be covered by exemptions in Chapter 7. The trade-off is that creditors must receive at least as much as they would have received in a Chapter 7 liquidation, so non-exempt assets still affect how much you pay.

Chapter 13 is often the better choice for people who:

• Are behind on mortgage payments and want to catch up while keeping their home
• Own property with significant non-exempt equity
• Have non-dischargeable debts they want to manage over time
• Don’t qualify for Chapter 7 because their income is too high

The Residency Requirement — Do You Qualify to Use New York Exemptions?

Here’s something many people overlook: you have to earn the right to use New York’s exemptions by living there long enough.

To use the New York state bankruptcy exemptions, you must have been domiciled in New York for at least two years prior to filing. If you’ve lived in New York for less than two years, you may need to use the exemptions from the state where you previously lived.

If you haven’t lived anywhere long enough to clearly qualify under either state’s rules, federal exemptions become the fallback option. This rule exists to prevent people from moving to states with generous exemptions right before filing, then using those protections without genuine ties to the state.

What Assets Are NOT Protected in New York Bankruptcy?

Knowing what’s NOT exempt is just as important as knowing what is. Here are the categories of assets that are generally not protected in a New York bankruptcy filing:

• Significant cash savings beyond the exemption limit (especially if claiming homestead)
• Investment accounts — stocks, bonds, mutual funds, and brokerage accounts outside of retirement accounts
• Second homes and vacation properties — the homestead exemption only covers your primary residence
• High-value collections — coins, stamps, art, and similar collectibles
• Musical instruments valued above $3,575 (unless you’re a professional musician)
• Luxury vehicles with equity well above the exemption cap
• Valuable jewelry exceeding the $1,175 limit

If you own assets in these categories, Chapter 13 may be a smarter strategy than Chapter 7, since it lets you keep everything while paying creditors through your plan.

Practical Tips for Protecting Your Assets Before Filing

Before you file, there are smart and legal strategies that can help you maximize your protected assets. There are also moves that can seriously backfire. Here’s what you need to know.

Legitimate pre-bankruptcy planning steps:

1. Do not drain your retirement accounts. These are almost fully protected and are safer inside your 401(k) or IRA than in a checking account.
2. Understand which exemption system protects you better. Model both the state and federal lists against your actual assets.
3. Don’t transfer property to family members. Fraudulent transfers within two years of filing can be reversed by the trustee — and can get your bankruptcy dismissed.
4. Avoid paying back family or friends you owe money to. These payments, called preferential transfers, can be clawed back by the trustee.
5. Consult a bankruptcy attorney before making any major financial moves. Timing, asset positioning, and filing strategy all matter.

For authoritative guidance on bankruptcy exemptions and planning, the United States Courts Bankruptcy Overview and New York State’s official Debtor and Creditor Law resources are reliable starting points.

New York Bankruptcy Law and Married Couples — Doubling Exemptions

If you and your spouse are filing for bankruptcy together, New York law allows you to double most exemptions — as long as you both have an ownership interest in the property being claimed.

For example, if a married couple owns a home together in Nassau County, they can together exempt up to $409,650 in home equity — double the individual cap of $204,825. The same doubling applies to personal property, vehicle equity (if both spouses own a vehicle), and other categories where joint ownership exists.

This makes joint filing particularly powerful for married New Yorkers with significant equity in their home or shared assets. However, you should analyze whether a joint filing or individual filing is more advantageous given your specific debt load and asset picture.

Common Misconceptions About New York Bankruptcy Law

Let’s clear up a few things that trip people up:

Myth: You lose your home if you file for bankruptcy. Reality: Most New York homeowners with equity under the homestead exemption cap can keep their home, especially in Chapter 13 and often in Chapter 7 as well.

Myth: Bankruptcy destroys your credit permanently. Reality: A Chapter 7 bankruptcy stays on your credit report for 10 years, but many people see significant credit score improvement within 18-24 months post-discharge.

Myth: All debts get wiped out. Reality: Certain debts are non-dischargeable — including most student loans, recent tax debts, domestic support obligations like child support and alimony, and debts incurred through fraud.

Myth: Only people with no assets file for bankruptcy. Reality: Bankruptcy is a financial tool. People with homes, cars, and retirement accounts file regularly — and come out with those assets intact.

Myth: You can hide assets from the bankruptcy trustee. Reality: Attempting to hide assets is bankruptcy fraud, which is a federal crime. Everything must be disclosed fully and honestly.

How to File for Bankruptcy in New York — The Basic Steps

If you’re considering filing, here’s a high-level overview of the New York bankruptcy filing process:

1. Complete a credit counseling course from an approved provider (required by federal law within 180 days before filing)
2. Gather your financial documents — income records, tax returns, a list of all debts, all assets, and recent bank statements
3. Determine which chapter you qualify for using the means test
4. Choose your exemption system — state or federal
5. File your bankruptcy petition with the appropriate U.S. Bankruptcy Court in New York (there are four districts: Southern, Eastern, Northern, and Western)
6. Attend the 341 meeting of creditors — a short hearing where the trustee asks you questions under oath
7. Complete your debtor education course (required before discharge)
8. Receive your discharge — typically a few months after filing in Chapter 7, or after completing your plan in Chapter 13

The U.S. Courts Bankruptcy Court Finder can help you identify the correct New York district for your filing.

Conclusion

New York bankruptcy law in 2026 is designed to give struggling people a genuine second chance — not strip them bare. The state’s bankruptcy exemption system protects your home equity up to $204,825 or more depending on your county, your retirement savings almost entirely, your car equity up to $5,500, essential personal property, most income and benefits, and tools needed for your work. You can choose between New York state exemptions and federal bankruptcy exemptions — whichever system shields more of what you own.

Chapter 7 offers a fast, clean discharge for those who qualify under the means test, while Chapter 13 lets you hold onto everything by repaying creditors over time. The biggest mistake most people make is either waiting too long to file or making panicked financial moves — like cashing out retirement accounts — right before filing. Know your exemptions, understand your options, and work with a qualified New York bankruptcy attorney to make sure you protect every asset the law allows you to keep.