The cash exemption is often of critical importance for New York consumers filing for bankruptcy. After all, the amount of money you can keep when you file for bankruptcy may determine whether you get your case into court now, or wait for awhile.
In New York, the cash exemption is $2,500 per person. But there’s a catch – you get to exempt the money only if you are not taking the homestead exemption. So if you’ve got a home you want to protect in a New York bankruptcy case then you get no exemption for dollars on hand whatsoever.
If you do not care about your homestead exemption, however, the cash exemption will come in handy. When reviewing your options, remember that we’re not talking only about money in your hand – it includes money in the bank as well as any money you expect to get your hands in in the near future (for example, your tax refund).
In this way, the cash exemption is very much like what other states call a “wild card” (New York bankruptcy law does not recognize a wild card in general, but for money the cash exemption is a pretty good substitute).
The simplest thing to do is wait until you file your case, and spend down your money on regular monthly household expenses. If you’ve got $5,000 but can protect only $2,500 there are probably a bunch of expenses you can wrap up – rent payments, phone, gas, electric, car insurance and things like that.
You can also deplete your non-exempt cash by paying down creditors that would not get wiped out in your Chapter 7 or Chapter 13 case. Owe back taxes or child support? Cut a big check!
There are other options for you to consider when faced with non-exempt case in New York, but it’s best to chat with an experienced bankruptcy lawyer before making any move that might otherwise jeopardize your case.