NY Bankruptcy Means Test
When you’re overwhelmed by debt, Chapter 7 bankruptcy allows you to start over financially. In exchange for surrendering any non-exempt property, you receive a discharge from unsecured debts like medical bills, credit cards, and personal loans.
To qualify for Chapter 7, however, you must take the means test, which compares your household income to the median amount for an equally-sized New York household. The purpose of this test is to verify whether you have enough disposable income after all necessary expenses to repay some or all of your debts in a Chapter 13 filing.
In this blog, we’ll explain everything you need to know about the NY bankruptcy means test, including how it is carried out, what your options are if you don’t pass it, and how to determine whether you qualify for an exemption.
How to Take the Chapter 7 Means Test
To take the NY bankruptcy means test, you must complete one (or possibly both) of the forms below.
- Form 122A-1: Chapter 7 Statement of Your Current Monthly Income
- Form 122A-2: Chapter 7 Means Test Calculation
These forms take into account your income, reasonable expenses, and household size to determine whether you qualify for Chapter 7 or have enough disposable income to address your debt in a Chapter 13 repayment plan.
Step 1: Gather Income Documentation
Start by gathering documentation about your income over the past six months. Then compare it to the median income for a New York household of similar size. (The income standards are drawn from US census data.)
For bankruptcy cases filed in New York state on or after May 1, 2021, the household income limits are as follows:
- One person: $4,761.42 per month, $57,137 per year
- Two people: $6,053.50 per month, $72,642.00 per year
- Three people: $7,353.33 per month, $88,240 per year
- Four people: $8,962.50 per month, $107,550 per year
- Five people: $9,712.50 per month, $116,550 per year
- Six people: $10,462.50 per month, $125,550 per year
- Seven people: $11,212.50 per month, $134,550 per year
- Eight people: $11,962.50 per month, $143,550 per year
- Nine people: $12,712.50 per month, $152,550 per year
- Ten people: $13,462.50 per month, $161,550 per year
When determining your eligibility, recent income changes are also taken into account. For example, if you got a new, higher-paying job during the six-month period, the increased income will be considered. If you are now unemployed and have been for the last month, the means test will factor in the income decrease.
If you make less than the median income, you’ve passed the NY bankruptcy means test and can proceed. If you make more, you may still be able to file for Chapter 7 if it can be shown that you have little disposable income after all allowable expenses are deducted.
Step 2: Gather Expense Documentation
Collect information about your necessary expenses during the last six months. They include but are not limited to:
- Medical and dental bills
- Car payments
Your NYC bankruptcy attorney will help you ensure that you have all allowable expenses properly documented.
Step 3: Subtract Allowable Expenses From Income
Deduct your expenses from your income. If the results show that you have little to no disposable income after the deduction, you will be allowed to file Chapter 7 and get relief from your unsecured debts. If not, you can work with your attorney to create a Chapter 13 repayment plan that lets you affordably repay your debt and even get caught up on non-dischargeable obligations like child support, back taxes, and the mortgage.
Can You Appeal the Means Test Results?
There is no way to appeal your means test results, but if you can’t or don’t want to file Chapter 13, you have the option of taking the test again if you believe that during the next six months, your financial situation will meet the Chapter 7 threshold. If your bank accounts have been frozen or creditors are garnishing your wages, however, you may need to take action sooner by filing Chapter 13.
NY Bankruptcy Means Test Exemptions
Not everyone who wants to file Chapter 7 in New York has to take the means test. Below is an overview of the situations where you may apply for a Statement of Exemption.
You Mostly Owe Business Debt
If over half of your total debts are business-related, you don’t have to take the means test. Business debts are generally classified as those incurred while trying to earn a living or make a profit.
Each court has its own method of calculating how much of your debt is business vs. consumer: some count the actual number of debts while others go by dollar amount. Your New York bankruptcy attorney can advise you on how the court you’ll be dealing with makes these determinations.
You Are a Disabled Veteran
If you are a disabled veteran of the US military and acquired your debts while on active duty or supporting homeland defense, you are exempt from taking the means test. To qualify, you must meet one of the following criteria:
- Your disability rating is 30% or higher
- Your disability occurred in the line of duty, resulting in your discharge
You Are a Reservist or National Guard Member
Military reservists or National Guard members who were called to active duty after September 11, 2001, and have been on duty for at least 90 days are exempt from taking the means test during that period and for 540 days afterward. However, this exemption is only temporary: when the exclusion period ends, you have to finish the test within 14 days.
Talk to a Bankruptcy Lawyer Today
Filing for Chapter 7 can allow you to live your life without worrying about the next creditor call or the sudden appearance of a collection lawsuit. With the support of Gershburg Law, PC, you can get the debt relief you need to put the past behind you and enjoy life to the fullest once again. We’re here to help, so if you would like to talk, call 212-390-8866 or contact us online.