If your monthly household income falls below the state median income for a household of the same size, it is presumed that you meet the means test requirements and qualify to file for Chapter 7 bankruptcy. Here, we explain New York state’s current median incomes which are effectively the current income limits to file for Chapter 7. To get legal guidance specific to your situation, please consult with our bankruptcy attorney John D’Amato.
New York Chapter 7 Bankruptcy Income Limit
Below are the updated income levels for New York residents filing for bankruptcy cases on or after November 1, 2023. These figures change twice a year, meaning the numbers below apply to the first few months of 2024. If your household has more than 9 members, add $9,900 for each additional family member.
Household Size and NY Annual Income Limit for Chapter 7 Bankruptcy
- One-Member Household – $66,402
- Two-Member Household – $84,089
- Three-Member Household – $101,266
- Four-Member Household – $126,194
- Five-Member Household – $136,094
- Six-Member Household – $145,994
- Seven-Member Household – $155,894
- Eight-Member Household – $155,894
- Nine-Member Household – $175,694.
Passing the New York Means Test for Chapter 7 Bankruptcy
A majority of individuals struggling with personal debt opt for Chapter 7 bankruptcy. The primary objective of this bankruptcy type is to liquidate the debtor’s non-exempt assets to repay their unsecured debts.
However, there is an income restriction for Chapter 7 proceedings.To be eligible for Chapter 7, you need to pass a “means test,” which looks into your average income in the last six months. You pass the means test if your family income falls below the state’s median income for a family of the same size.
If that is not the case, you will have to undergo the more rigorous second stage of the means test. This evaluation compares your income with your expenses, aiming to establish your financial capability to repay your debt.
New York Bankruptcy Means Test: Eligibility for Higher-Income Filers
The initial step of the means test is usually sufficient for those opting for Chapter 7 bankruptcy. However, if your monthly income exceeds the state median, the court is required to apply the more meticulous part of the test. It will look at your present monthly income and deduct the following costs, up to a certain amount:
- Healthcare costs, covering dental and vision expenses, provided they are necessary for your well-being
- Food expenses
- Housekeeping supplies
- Clothing expenses
- Personal care expenses
- Financial obligations like mortgage or rent payments
- Payments related to property taxes, interest, and insurance
- Home repair costs
- Utilities, including expenses for your cell phone, internet, and cable
- Car payments and associated expenses
- Specific payments such as child support, childcare expenses, life insurance, employment-related needs, and even contributions to charitable organizations.
Exemptions to the Means Test
If your debts are mainly not consumer debts, you will be considered exempt from the means test. Further, if you are a disabled veteran and acquired the majority of your debt while on active duty or engaged in homeland defense, you will also be exempt from the means test.
Consequences of Failing the NY Bankruptcy Means Test
If your income surpasses the median monthly threshold and you still have a certain amount of disposable income after expenses, you would have failed the means test. Fortunately, there are still options available to help manage your debts.
Depending on your financial circumstances, it might be necessary to wait for some time until your income decreases or expenses increase. This can bring you within the limits of the six-month average calculation. We’ve seen this situation happen to filers who have later lost their jobs, so the state median income of the past six months became higher than their current earnings.
If it seems unlikely that you will pass the means test in the coming months, you have the alternative option of filing for Chapter 13 bankruptcy instead. This form of bankruptcy allows for the consolidation and reduction of your debts but does not completely remove them. You will still be required to repay a reduced amount over a specific timeframe. For individuals with a higher base income, this may be the more viable choice.
Consult an Experienced Bankruptcy Attorney in New York
When considering bankruptcy, it is important to weigh the benefits and drawbacks of both Chapter 7 and Chapter 13. You may also need other debt relief strategies to safeguard your financial well-being. Take the time to explore all potential avenues for protecting your hard-earned assets and achieving financial stability once again.
To discuss your specific circumstances and develop a customized plan, contact Attorney John D’Amato today at 716-706-0000. He is ready to help you take positive steps forward.