New York debtors in bankruptcy and other court cases will be able to shield more assets from lenders under a law signed by Governor David Paterson.
“We think it’s a good bill,” Paterson said in an interview today on New York City radio station WOR. “You don’t want to leave a person destitute.”
The bill passed the Senate and the Assembly this year. Paterson, 56, a Democrat who didn’t run for election this year, leaves office at year-end.
The measure may make it harder for New York City to enforce parking rules and collect unpaid tickets, according to a July letter from Mayor Michael Bloomberg. The city will seek to amend it to solve that problem, said a spokesman for the mayor.
“I understand from legislators and advocacy groups that have supported this bill that they are fully committed to addressing the concerns raised by New York City and others,” Paterson said in a statement announcing the bill’s signing.
The law increases the dollar value of some exemptions for the first time since the 19th century, and raises others to levels that would help debtors live without government assistance, said Charles Juntikka, a New York City lawyer who represents debtors.
Most lenders seeking judgments that could allow property seizures are credit card banks, Juntikka said.
Under the new law, debtors can retain vehicles valued as much as $4,000 above an associated loan, up from $2,400. They also may keep a home with equity of $75,000 to $150,000, depending on location, up from $50,000. Home equity is the value of a home, less mortgages.
New York’s previous $50,000 limit ranked 29th among states and wasn’t high enough to allow debtors to keep their homes, said David Cohen, a professor at Pace University’s law school in White Plains, New York, and a proponent of the bill.
The increased exemptions will hurt the state economy by causing a “further contraction in credit availability” as banks tighten lending standards, said a memorandum submitted to lawmakers on behalf of the New York Bankers Association by the Albany office of law firm Wilson, Elser, Moskowitz, Edelman & Dicker LLP.
Bloomberg’s letter said the bill “creates enormous new hurdles for marshals and Department of Finance deputy sheriffs who tow cars to collect unpaid parking tickets.”
Towing as Incentive
The city tows 120,000 vehicles a year, creating a “powerful incentive” for paying parking tickets, the letter said. Debt collectors “lack the capability or bandwidth to research” the value of cars and associated loans before towing, it said.
“We will be working with the Assembly for passage of an amendment” to eliminate obstacles to towing cars of parking scofflaws, said Marc Lavorgna, a spokesman for the mayor. A similar amendment passed the Senate earlier this year, he said.
Banks should be more “stringent” in their lending, Paterson said in the interview today. “If this causes the lenders to be more careful, we’re very happy with that outcome.”
Mayor Bloomberg is the founder and majority owner of Bloomberg News parent Bloomberg LP.