Owning a co-op and filing for Bankruptcy in New York
My fans have been asking me to write this blog post for sometime. Practically begging me. For so long, I said no. I couldn’t do it. I couldn’t touch the subject. It was too painful. But Im finally ready…so here goes: Can you file for Bankruptcy in New York City and keep your Co-Op? As our good President would say: “Yes we can”.
The Co-Op, although in my opinion being the red headed step-child of the Real Estate world where “The Board” comes together to eat pizza and laugh at potential applicants, enjoys the same exemptions as houses and condo’s do under Bankruptcy law. Namely, we’re able to exempt up to $150,000.00 in equity in the property(the value of the shares). More importantly, if you’re married and both you and your spouses name are on the co-op shares and both of you file, you can exempt up to $300,000.00. What does that mean for you? Well, I’ve yet to see a co-op with more than $300,000 in equity in it. That’s not to say there arent any. Im sure there are many. But I can tell you that with the new laws, you now have the ability to keep your co-op and get rid of all of your credit card debt.
Theres another thing to note as well. So lets say that you own a co-op as a single person, and the Co-Op has over $150,000 in it. Lets say it’s got $180,000.00 You’re doomed, right?! No. Not at all. The thing is, you have to look at this from the angle of the Chapter 7 Trustee. The Trustee wants to sell the thing and disburse some money to creditors. But, like any other real estate deal, they’ve got to pay everyone thats in line for the money first. What that means is that if there are taxes to pay, like the ever present FLIP TAX and the Real Estate Broker, theres probably not going to be any money left at the end of the day, which means the Trustee may very well abandon the the Unit and give it back to you. Huge caveats here left and right in terms of the details and how to go about this, but the point is just because its over the equity exemption, doesn’t mean you lose your home.
But thats got to be done properly. Documents have to be sent to the Chapter 7 Trustee evidencing all of these figures. They may want to do an appraisal of their own. This is why I always say that if you have any type of assets, trying to do a Chapter 7 Bankruptcy by yourself is a mistake. Speak to someone, you know, who does this like every day maybe.