Don’t Forget About NY’s Homestead Exemption

August 14, 2014 at 9:10 am Leave a comment

NY’s Homestead Exemption has been around since1850 but wasn’t big enough to provide much of a concern to creditors until the last decade.  This exemption, like others across the country, shields equity in a principal dwelling up to a statutorily prescribed dollar amount from application of a judgment lien.  A recent decision by the Court of Appeals for the Second Circuit that retroactively applied homestead exemption increases further puts creditors on notice that they may not have as much equity to go after as they thought.

Just how much has NY’s homestead exemption increased? It was increased from $10,000 in 1977 to $50,000 in 2005 and now stands at a baseline of $75,000 in 2010 with regional differentials that make it as high  as $150,000 in certain counties.

So, you all should take note of a decision by the Court of Appeals for the Second Circuit which answered the following question: Does the 2005 Amendment’s increased homestead exemption apply to judgment liens perfected prior to the amendment’s effective date? The answer is yes.

When Tanya Calloway filed for Chapter 7 bankruptcy in 2009, her house was valued at $110,000 with $85,000 remaining on her mortgage. If the pre-2005 homestead exemption applied then there was still money the creditors could go after but if the $50,000 exemption applied then the creditors were out of luck. 1256 Hertel Ave. Associates, LLC v. Calloway, 12-1603-BK, 2014 WL 3765864.

Deciding the issue for the first time, the Court concluded that “[a]lthough the Legislature made no specific pronouncement as to the 2005 Amendment’s effect on pre-enactment debts, the statute’s legislative history reflects a clear sense of urgency that the homestead exemption limit be immediately adjusted to bring it in line with modern home values.”

This ruling just applied to the retroactively of the Legislature’s 2005 homestead exemptions; however, I would work on the assumption that if you have a judgment lien on someone’s principal dwelling, the court will apply the exemption in effect at the time you move to enforce the judgment. Given how high NY’s homestead exemption is now, your liens may not be worth the paper they are printed on.    

European News Impacts Your Search For Yield

News out of Europe this morning that Germany’s GDP shrank and that Europe’s nascent economic recovery ground to a halt will further complicate the search for yield. Here’s why.

First, the yield on the German 10-year bond has actually fallen below 1% for the first time in history. At first blush, this makes no sense.   Since interest rates and bond prices have an inverse relationship, why should the cost of buying a German bond increase? Because, like U.S. Treasuries in the dark days of 2008, when the economy is bleakest, investors ultimately want to put their money in the economy where it is safest. This is kind of interesting, Henry, you may be musing, but how does it affect me?

Because, as explained in this article, “low yields in Europe remind us that the current 2.4% yield on the 10-year [U.S.] Treasury Note is actually relatively high.” In other words, if there is no lack of demand for U.S. debt at current rates, then don’t expect that to change in the near future.

Entry filed under: Economy, Legal Watch. Tags: , .

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Authored By:

Henry Meier, Esq., General Counsel, New York Credit Union Association.

The views Henry expresses are Henry’s alone and do not necessarily reflect the views of the Association.

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