Bankruptcy exemptions protect the equity in your property from creditors and the bankruptcy court—preventing the equity from being used to pay your creditors. Equity is the value of property after you subtract the amount of any liens against the property from its fair market value.

The equity in your home is one such asset in bankruptcy. And bankruptcy exemptions—including the homestead exemption—allow you to protect the property you will need to maintain a home and employment after bankruptcy.

Bankruptcy exemption amounts vary by state, so the amount you will be able to protect will depend on where you live and the type of bankruptcy you file (Chapter 7 or Chapter 13).

In New York, bankruptcy exemptions allow individuals to protect certain assets when filing for bankruptcy, ensuring they can maintain a basic standard of living. The homestead exemption is particularly important for homeowners, as it protects a portion of the equity in their primary residence. As of the knowledge cutoff in 2023, New York's homestead exemption ranges from $85,400 to $170,825, depending on the county. The exact amount of the exemption that an individual can claim depends on the county in which they reside, with higher exemptions available in counties with higher cost of living. Additionally, New York allows debtors to choose between state-specific exemptions and federal bankruptcy exemptions, but they cannot mix and match between the two systems. The type of bankruptcy filed—Chapter 7 or Chapter 13—also affects the exemptions. In Chapter 7, assets can be liquidated to pay creditors, while Chapter 13 involves a repayment plan. It's important for debtors to consult with an attorney to understand how exemptions apply to their specific situation and to maximize the protection of their assets.