Understanding the Bankruptcy Means Test in New York

The Bankruptcy Means Test is a crucial component of the bankruptcy process, especially for those considering filing in New York. This test helps determine whether an individual qualifies for Chapter 7 bankruptcy, which allows for the discharge of certain debts.

In New York, the Means Test compares your average monthly income to the median income in the state for a similar household size. If your income is below the median, you automatically qualify for Chapter 7 bankruptcy. However, if your income is above the median, you will need to calculate your disposable income to determine if you can proceed with Chapter 7 or if you will need to file for Chapter 13 bankruptcy instead.

The calculation of disposable income involves deducting allowable expenses from your income. These expenses can include costs for housing, utilities, transportation, and other necessary living expenses. The U.S. Bankruptcy Code outlines specific guidelines on what expenses can be deducted, ensuring that only reasonable and necessary costs are accounted for.

In New York, the median income figures are updated regularly, and they vary depending on the household size. It’s essential for individuals to check the most recent statistics from the U.S. Trustee Program or local bankruptcy courts to ensure they use accurate data when determining their eligibility.

For those who do not pass the Means Test, Chapter 13 bankruptcy offers an alternative route. This chapter allows individuals to create a repayment plan to pay back some or all of their debts over three to five years. Filing for Chapter 13 can stop foreclosure proceedings and help individuals retain valuable assets while managing their debts.

It's advisable to seek guidance from a qualified bankruptcy attorney in New York when navigating the Means Test and the bankruptcy process. Attorneys can provide valuable insights into allowable deductions, assist with calculations, and help prepare the necessary documentation to file successfully.

In summary, understanding the Bankruptcy Means Test in New York is essential for anyone considering bankruptcy as a solution to their financial difficulties. By assessing your income against the state’s median and calculating disposable income, you can determine the best path forward.