New York Bankruptcy Means Test Calculator: Estimate Qualification and Cost

Chapter 7 Means Test Explanation

The bankruptcy test is like an income test you complete when filing for bankruptcy. It's a standardized form from the United States Trustees office. The form calculates your average monthly income and then annualizes it to determine your average annual income.

Here are a few essential things to know about the bankruptcy means test:

1. In New York, the means test considers your entire household income, even if your spouse isn't filing with you (unless you're legally separated).
2. It compares your average household income to other household incomes in the state. It uses data from the Census Bureau.
3. You must fill in the average monthly income you received from all sources six months before filing your bankruptcy case. If your monthly income varied during those six months, add the income for all six months and divide the total by six. Don't include any income amount more than once. If there's nothing to report for a particular line, write $0 in the space.
4. If your income is variable, you can use an average income calculator specifically designed for the New York means test. It helps estimate your average monthly income.

Now, let's dig into the calculation of the bankruptcy means test in New York for bankruptcy cases filed in 2023.

New York Chapter 7 Bankruptcy Income Limit

Next, I will cover the household income levels for bankruptcy cases in New York. These figures are specifically for cases filed on or after April 1, 2024, and tend to change every six months. So, make sure to keep an eye out for any updates. Take a look at the table below to see the annual income thresholds based on the number of people in the household:

If your household size exceeds 9, you may be able to add $9,900 for each additional family member.

What Is Considered Income?

Not all income is considered when determining if you're eligible for bankruptcy. For example, disability and social security, as well as payments to victims of war crimes and those related to a national emergency, may not be included.

You may be curious about what income is considered in bankruptcy. Any regular payments made by someone other than those filing for bankruptcy for household expenses are included. So, let's take a quick peek at some of the income types that fall under this category:

1. Salaried income
2. Spousal income
3. Hourly and overtime income
4. 1099 Income
5. Net Rental Income
6. New York government income
7. Child support and Alimony
8. Dividend, Interest, and Royalties
9. Pension and Retirement Income
10. Net business income
11. Annuity payments
12. Unemployment compensation
13. Worker's Compensation Benefits

What Is Considered In Household Size?

Another question that often is asked is how household size is determined. You may wonder if your roommate counts as a household member. Well, the answer is no. However, your children, who you claim depend on your taxes, are usually considered part of your household.

Let's say you have children who are away at college or engaged but not yet married. In different New York bankruptcy jurisdictions, rules about who can be included in your household size may exist. Consider checking with your bankruptcy attorney to ensure you put the correct household size.

New York Above Median Bankruptcy Means Test

You may realize that your income is over the threshold for Chapter 7. But don't worry; you might still qualify for the means test. You can use two forms: the Statement of Exemption from Presumption of Abuse Under Section 707(b)(2) and the Chapter 7 Means Test Calculation. These forms help determine if you're eligible for Chapter 7 bankruptcy.

The second part of the means test is generally where you can deduct your allowable monthly expenses from your current monthly income to calculate your disposable income. Disposable income is the money you have left after paying your expenses. If your disposable income is below a certain amount, you can sometimes still qualify for Chapter 7 bankruptcy.

That all being said, you can estimate your initial qualification based on the first part of the means test below:

Allowable deductible expenses

You may wonder what is considered a deductible expense in Chapter 7. You can deduct certain expenses as actual expenses on the second part of the test. Let's take a look at them:

• Mandatory employment deductions like union dues, retirement plans, and uniforms
• Health and disability insurance premiums
• Income taxes
• Child care expenses
• Term life insurance premiums
• Secured debt payments for your car and home
• Alimony and child support payments
• Charitable contributions

Now, there are other expenses that you can deduct for exceptional circumstances. However, these expenses have limits and depend on the number of people in your household. You can refer to the current national standards to determine the maximum amounts allowed for these expenses. Here are the expenses:

• Housekeeping supplies
• Clothing
• Food
• Personal care services and products
• Housing and utility expenses
• Transportation expenses
• Out-of-pocket healthcare expenses

If you have any other questions, consulting with a local bankruptcy attorney in New York can sometimes be helpful. They can often provide a free evaluation and help you navigate the process.

What Happens If You Fail the Bankruptcy Means Test?

If the bankruptcy means test doesn't work out in your favor, options are still available.

One of those options is a Chapter 13 bankruptcy. This particular type of bankruptcy allows you to create a payment plan to repay your debts over some time, usually three to five years. You can explore other alternatives if Chapter 13 bankruptcy doesn't seem like a good fit. These alternatives include debt settlement, debt management, and debt payoff planning. They offer different approaches to managing your debts and finding solutions.

Chapter 13 Bankruptcy

A Chapter 13 bankruptcy in New York is a repayment plan. You devise a payment plan to pay off a portion of your debts. Typically, you can usually keep your assets, and there's no need to qualify as long as you're under the debt limits. Plus, it stays on your credit report for seven years instead of the usual 10. The catch is it can take either 36 or 60 months to complete. But your payment plan might be shorter if you're in 100% Chapter 13.

You may wonder why someone files for Chapter 13 bankruptcy instead of Chapter 7 bankruptcy. Some people opt for Chapter 13 if they have more equity than what's allowed under the New York bankruptcy exemption.

Debt Settlement

Next, debt settlement is a way to lower your debt balance and get some forgiveness on what you owe. It's like negotiating with a company to pay back less than your original debt. Picture this: you owe $50,000, but you can bring that down to a more manageable $25,000 through debt settlement.

Now, debt settlement usually comes with a payment plan that lasts anywhere from 12 to 60 months. Sometimes, it can be cheaper than filing for Chapter 13 bankruptcy. It is essential to know that not all debt settlement companies are the same. Some charge around 25% (or more) of your enrolled debt, which can add up over time.

When finding the right debt settlement company, thorough research can be helpful. You can always check out the Consumer Finance Protection Bureau for the latest debt settlement program information. You may not necessarily need to find a local debt settlement firm in New York. Many of these companies are national, so you have different options.

Debt Management

Debt management, or credit counseling as some call it, is when a company steps in to lower the interest rate on your debt. Picture this: you owe money, and the interest rate is 22%. A debt management company can negotiate that rate to around 9%. Most debt management companies are non-profits and can help with many credit cards. However, they might be unable to help you with those unsecured personal loans.

The debt management program usually involves a payment plan that spans anywhere from 36 to 60 months. It allows you to pay off your debt in a way that won't leave you penniless. Similar to debt settlement, many of these debt management firms are national, so you don't have to search for one in your area.

Summary

In conclusion, understanding the bankruptcy means test and income limit in New York for Chapter 7 bankruptcy qualification can sometimes feel overwhelming. Hopefully, we were able to explain it in more straightforward-to-understand terms.

1. The means test generally considers how your household income compares to the New York income limit. It takes certain incomes into account while excluding others.
2. If your household earns more than the income limit, you might still qualify for Chapter 7 bankruptcy in New York based on your expenses and deductions.
3. If you don't qualify for Chapter 7, other options, such as Chapter 13 bankruptcy, debt settlement, and debt management, may remain.

Hopefully, this article has shed some light on the bankruptcy means test and income limit in New York. If you're curious if you qualify for Chapter 7, go ahead and give the New York bankruptcy means test calculator below a try. It'll give you a rough estimate of your eligibility.