Personal property retained in New York bankruptcies depends upon the chapter selected. Chapter 7 liquidation requires strict compliance with statutory property limitations. Chapter 13 incorporates a less direct scheme requiring, as a condition of confirmation of the plan, that the court determines that creditors will receive at least as favorable distribution of assets as would be available if the filing Chapter 7. Most liens are unaffected by filing and remain enforceable. Creditors may foreclose liens in Chapter 7 (with court approval lifting the automatic stay) if payments are past due. Ch. 13 allows past due payments to be rolled into the plan and are considered current which prevents foreclosure. In addition to purchase money security interests, other liens may be created by operation of law securing child support obligations, taxes, and emergency hospital treatments. These statutory liens remain largely unaffected by filing.
When filing New York bankruptcy, property is considered to be of two broad classes: real estate and personal. Within the RE classification, sub-classification is based upon "homestead" designation. Personal assets are sub-classified based on the state legislature's opinion of necessity in connection with a realistic fresh start. In Ch. 7, If equity value is greater than the statutory limit for a specific exemption, by a significant amount, trustees usually require forfeiture of assets.
State law determines a each debtor's right, title, and ownership in real estate. Primary residences receive special protection, while secondary homes, invest RE, and non-possessory interests (business, trusts, etc.) are subject to forfeiture. For more information regarding RE issues, see: Valuation & Restrictions, Residency Requirements, and Sale of Property.
All assets owned must be disclosed in schedules filed with the Court. The statutory definition of property ownership is construed broadly to include not only physical assets, but also intangible, contingent and mixed rights, causes of action, and potential claims. Contractual rights and options, potential causes of action against others, and legal entitlements may represent a bona fide value and must be disclosed. Only specific property may be retained under New York bankruptcy exemption statutes, including: General household goods, Legal Causes of Action Against Others, Trust Estates, Accounts & Fiduciaries, and Insurance & Medical Aids. If the court lifts the automatic stay upon request of any creditor, they must nevertheless follow general state collection laws and limitations. For more information regarding collection procedures, see: levy procedures & public auction procedures.