If you are a New York City resident considering bankruptcy and own a Mitchell-Lama cooperative apartment, you may be wondering: Can I keep my Mitchell-Lama coop if I file for bankruptcy? The answer is yes, thanks to bankruptcy exemptions that allows debtors to protect certain assets from creditors. In this blog, we will examine how Mitchell-Lama coops fit into the bankruptcy process and what protections are available for this form of affordable housing.
What is a Mitchell-Lama Coop?
The Mitchell-Lama program was created to provide affordable housing for moderate and middle-income families. Under this program, residents can purchase cooperative apartments at below-market rates with restrictions on the transfer of the coop shares, making homeownership more accessible in a notoriously expensive real estate market. Mitchell-Lama coops are unique in that they are not just affordable housing, but they are also a form of real estate ownership. As such, they are considered an asset in a bankruptcy filing.
A Brief History of the Mitchell-Lama Program
Established in 1955 by the Limited-Profit Housing Companies Act, the Mitchell-Lama program was designed to incentivize private developers to build affordable housing in exchange for tax breaks and low-interest loans. In return for this opportunity, developers agreed to limit profits and adhere to strict regulations, including resale restrictions. Over decades, this program has helped tens of thousands of New Yorkers secure stable, cost-effective housing. Today, Mitchell-Lama coops remain an important part of the city’s affordable housing landscape.
Mitchell-Lama Coops Are Real Estate Assets
When a debtor files for bankruptcy, all of their assets must be disclosed in the petition and papers they file with the Bankruptcy Court, this includes Mitchell-Lama coops. Since these apartments are considered to be a form of real estate, they are subject to the same asset considerations as a traditional home.
However, unlike traditional real estate, the resale value of a Mitchell-Lama coop is restricted by the program’s rules. Typically, an owner of a Mitchell-Lama coop can only receive the money that they initially invested in the coop minus any carrying charges owed or restoration fees. As a result, these apartments have a lower fair market value compared to other real estate assets. This can work in a debtor’s favor when they are seeking to exempt the asset in bankruptcy.
Mitchell-Lama Coop are Protected by Bankruptcy Exemptions
The Bankruptcy Code allows filers to protect certain assets through exemptions, including a homestead exemption to protect one’s primary residence. In New York, debtors filing for bankruptcy can choose between federal exemptions and New York State exemptions. They must choose one set or the other. They cannot mix and match exemptions between the sets. The good news is that both sets of exemptions contain a homestead exemption that can protect the equity in a Mitchell-Lama coop.
Due to the limited equity of Mitchell-Lama coops, most owners of a Mitchell-Lama coop who file for bankruptcy can choose the federal homestead exemptions which have a wider array of overall exemption allowances. Under the federal bankruptcy laws, the homestead exemption is limited to $31,575.00 under 11 U.S.C. § 522(d)(1). The federal exemptions will also allow a debtor to use the unused portion of the wildcard exemption which allows for the protection of any property besides a homestead up to $17,475. This includes such important assets as cash, money in the bank, equity in a car, or literally any other assets. The federal exemptions also have a much more generous personal injury exemption than the New York State set of exemptions ($31,575 plus any unused wildcard exemption vs. $10,250).
If a debtor needs to protect more equity in a Mitchell-Lama coop than the federal exemption will allow, they can use the New York homestead exemption. As of 2025, New York’s homestead exemption can protect up to $204,825.00 of equity (depending on the county where you live) in a primary residence, including coops. While some more recently purchased Mitchell-Lama coops may have an equity value above the federal exemption, none are valued above the New York state homestead exemption. Therefore, you can always protect your Mitchell-Lama coop using bankruptcy exemptions when filing for bankruptcy and retain the coop after your case is complete.
Contact The Law Offices of David I. Pankin, P.C.
If you are considering filing for bankruptcy, please do not hesitate to contact the Law Offices of David I. Pankin, P.C. for a free consultation. We can be reached by phone at (888) 529-9600, or by using our easy online contact form. For over 28 years, we have helped thousands of New Yorkers navigate the bankruptcy process while protecting their assets, including Mitchell-Lama coops.
