Your ability to file for Chapter 7 bankruptcy involves looking at your household income for the six-month period prior to filing your bankruptcy case, then multiplying that average monthly income by 12. If the resulting number is below the median family income for a household of your size in your state then the presumption is that you qualify for Chapter 7 bankruptcy.
If your household income is above the median family income then you’re going to need to go through a longer process to determine whether you can file for Chapter 7 or must instead file for Chapter 13 bankruptcy.
The median income for New York for cases filed after November 1, 2012 is:
- 1 person: $46,821
- 2 people: $58,106
- 3 people: $67,652
- 4 people: $81,522
For each individual in the household in excess of 4, you can add $7,500.
What this means is that if you are a single person or a one person household earning less than $45,931 then you are going to qualify for Chapter 7 bankruptcy. If you earn more than $45,931 then we’re going to need to do a more in-depth means testing process to figure out whether you can still go through a Chapter 7.
Bear in mind that your situation may make Chapter 13 a better choice even if your income is higher than the median in New York. On the flip side, your income may be significantly above median income and still allow you to go into Chapter 7. The means test isn’t a bright line for qualification, merely a bright line for breaking out the calculator.
For example, if you’ve got mortgage or car payments, those are considered expenses that can be subtracted from your means test to bring you close to the Chapter 7 line. So, too, for tax payments. In fact, there are a host of expenses that New York residents can use to help them qualify for Chapter 7 bankruptcy. The key is to work with someone like me who knows the ropes and can help navigate the complexities of the means test.
Either way, don’t freak out. We’ll work on it together.