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Good News for Consumers on Long Island — Chapter 7 Bankruptcy Will Be Easier to Qualify For

Bankruptcy Means Test Criteria Changing March 15, 2009.  This will enable more Long Island Consumers to file Chapter 7 Bankruptcy casesNew Means Test Critera Goes Into Effect March 15, 2009
When the bankruptcy laws were drastically overhauled in 2005, Congress imposed a “Means Test” requirement to determine eligibility to file for Chapter 7 relief.
The government just revised the criteria used to calculate the means test which means that more Long Island consumers will be able to discharge all of their debts in Chapter 7 bankruptcy cases.
The 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 [1].

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 [2], and may instead have to file a payment plan bankruptcy under Chapter 13 [3].  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.

New Criteria – Great for Long Island Bankruptcy Cases

The new criteria, which is based on U.S. Census figures and I.R.S. tables, increases the median income for residents of the State of New York.  It also increases the various Means Test deductions which will make it easier for Long Island residents to be eligible for Chapter 7 bankruptcy relief. 

 This will have the effect of enabling more Long Island consumers to qualify than before and get total debt relief.

 Impact on 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.  I anticipate that this number will increase and that even more Long Island consumers will qualify for Chapter 7 bankruptcy when the new criteria is used.

Census Bureau Median Family Income By Family Size

(Effective for cases filed after 3/15/09)









New York





 Add $6,900 for each individual in excess of 4.

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