The homestead exemption is the single most important protection for homeowners filing bankruptcy in New York. It determines how much equity in your primary residence is shielded from creditors. Understanding the exemption amount — and how it applies to your specific situation — is critical before filing.
How the Exemption Works
New York's homestead exemption, codified in CPLR §5206 and Debtor and Creditor Law §282, protects a specific dollar amount of equity in your primary residence. Equity is calculated as your home's fair market value minus your mortgage balance and any other liens.
If your equity is within the exemption limit, the bankruptcy trustee cannot sell your home to pay creditors. If your equity exceeds the exemption, the trustee can sell the home — but must pay you the exemption amount from the proceeds before distributing anything to creditors.
Exemption Amounts by Region
New York's homestead exemption amounts vary by county. For the Hudson Valley region — including Dutchess, Putnam, and Orange counties — the exemption is $179,950 per person as of 2026. In some downstate counties (Westchester, Rockland, NYC), the amount may be higher.
For married couples who jointly own their home and file a joint bankruptcy petition, each spouse can claim the exemption, effectively doubling the protected amount. This means a married couple in Dutchess County could protect up to approximately $359,900 in home equity.
Calculating Your Protected Equity
To determine whether your equity is protected, you need three numbers: your home's current fair market value, your total mortgage balance, and any other liens on the property. Subtract the debts from the value to get your equity.
Getting an accurate market valuation is essential — and it is where the Hudson River Realtors network can help. A confidential comparative market analysis (CMA) gives you a realistic picture of what your home would sell for in today's market, which directly determines whether your equity is within the exemption.
What If Your Equity Exceeds the Exemption?
If your equity exceeds the homestead exemption, you have several options. You may choose Chapter 13 instead of Chapter 7, since Chapter 13 allows you to keep all property regardless of equity (though you must pay unsecured creditors at least the value of your non-exempt equity through your plan). You could also sell the home before filing and use the exempt proceeds for a fresh start. Or you could wait for market conditions to change, as declining values might bring your equity within the exemption.