Written by Craig D. Robins, Esq.
New Bankruptcy Means Test Criteria Goes Into Effect November 1, 2010
The figures that you need to use for the means test change periodically. The last change was on March 15, 2010. The recent changes actually make it slightly harder to qualify. However, the difference is relatively small so that it should hardly matter for most Long Island consumers.
In order to automtically pass the bankruptcy means test your income must be less than the median income in the state where you live. For New York residents, it will be slightly more difficult for some families to qualify for Chapter 7 bankruptcy than last year. For those seeking to file for Chapter 13 bankruptcy, some families will have to pay slightly more each month.
The figures used for the each state’s median income are based on United States Census data, and adopted by the Office of the United States Trustee. These figures routinely change once or twice a year.
Usually income rises each and every year because of inflation, the cost of living, etc. However, because we are currently in a recession, income has actually decreased slightly from the prior year. This started happening with just some family sizes last year.
The last time the median income figures were updated for the Means Test prior to the March 15, 2010 change was November 1, 2009.
New Means Test Figures
Family Size of One: If you are a single individual, which means that you have a “family size of one”, the New York median income has decreased for the third time, from $46,320 earlier this year to $45,548. This is a minor but nevertheless significant change of $772 per year, or about $64 per month. However, chances are that very, very few potential Chapter 7 debtors will be adversely affected by such a small change.
Family Size of Two: For a family size of two, the new median income figure is $56,845.
Family Size of Three: For a family size of three, the new amount is $67,292.
Family Size of Four: For a family size of four, the new median income amount is $82,587.
The Bankruptcy Means Test
This is a comprehensive, very complex series of calculations that the federal government designed to ascertain whether someone qualifies for Chapter 7 filing.
The Means Test formula is designed to evaluate whether a debtor has the financial means to pay back a substantial portion of his or her debts. If the person does, then he or she may not be eligible to file Chapter 7 bankruptcy , and may instead have to file a payment plan bankruptcy under Chapter 13 .
If debtor’s income is below the New York State median income for a family of that particular size, then passing the Means Test is virtually automatic. If not, the debtor must have a sufficient amount of acceptable deductions permitted by the Means Test.
Impact of New Means Test Figures on Consumers Filing Bankruptcy on Long Island
In my Long Island bankruptcy law practice, I estimate that at least 7 out of 8 clients now seeking to file for Chapter 7 bankruptcy relief do indeed qualify under the means test. However, the new numbers may just slightly hurt some couples or small families trying to qualify for Chapter 7 bankruptcy when the new criteria is used.
New Median Family Income Figures for New York
(Effective for cases filed after 11/01/10)
Family Size Amount
Add $7,500 for each individual in excess of 4.