Written by Craig D. Robins, Esq.
New Bankruptcy Means Test Criteria Goes Into Effect November 1, 2009
Passing the bankruptcy means test is dependant upon the amount of median income in the state where you live. For New York residents, it will be slightly easier for some families to qualify for Chapter 7 bankruptcy next month. For those seeking to file for Chapter 13 bankruptcy, some families will be able to pay less 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.
New Means Test Figures Not Helpful for Everyone
Family Size of One: For the first time ever, some of the figures have actually decreased. If you are a single individual, which means that you have a family size of one, the New York median income has decreased from $46,523 to $46,485. This is a change of only $38 per year, or $3 per month. Nevertheless, it is less. Chances are, however, that one 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 just over $1,000 more than the old amount, making it slightly easier to qualify.
Family Size of Three: For a family size of three, the new amount is about $1,400 per month more, which will certainly be a help.
Family Size of Four: For a family size of four, the new median income amount is actually about $500 less than the previous figure, making it the slightest bit harder for typical families to qualify for Chapter 7 bankruptcy. However, the difference is so small that it should hardly matter for most Long Island consumers.
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. Under the old bankruptcy law, almost anyone could seek to eliminate their debts by filing Chapter 7. The new laws changed that. Click here to take a look at the actual Means Test form .
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 about 7 out of 8 clients now seeking to file for Chapter 7 bankruptcy relief do indeed qualify under the means test. The new numbers may just slightly help some couples or small families qualify for Chapter 7 bankruptcy when the new criteria is used.
New Median Family Income Figures for New York
(Effective for cases filed after 11/1/09)
Family Size Amount
Add $6,900 for each individual in excess of 4.