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Bankruptcy Means Test in New York

The bankruptcy “Means Test” was created by legislation in 2005. In Chapter 7 bankruptcy cases, the means test is used to determine a person’s eligibility to file for Chapter 7, by analyzing the debtor’s income over the six month period preceding the bankruptcy filing. Although the means test is not used in Chapter 13, a similar analysis is done to determine the length of the repayment plan (between 3 and 5 years) and the amounts that must be repaid to unsecured creditors.

The Means Test is very complicated, and an experienced bankruptcy attorney will be able to help you apply the test to your particular circumstances.

Long Island Attorney Explains Bankruptcy Means Test

Contact The Law Office of Andrew M. Doktofsky, P.C. at 631-812-7020 for answers to your questions about the Chapter 7 Means Test. Attorney Andrew M. Doktofsky will determine if you are eligible to file for Chapter 7 bankruptcy after analyzing all relevant information. Call today if you would like to learn more about the Means Test, and filing for Chapter 7 bankruptcy, throughout the areas of Suffolk County and Nassau County, New York.


New York Bankruptcy Means Test Information Center


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Definition of Bankruptcy Income Terms

The following definitions, as defined in the Bankruptcy Code, will aid in understanding the Means Test:

  • Income — Income can come from any source, including wage earnings, business income, pensions, and unemployment benefits, to name a few. A debtor’s spouse’s income is included in the debtor’s income, even if the spouse is not filing for bankruptcy, except in cases where they are separated or living apart. Additionally, any contributions to household expenses from anyone other than the debtor are considered to be income. However, any payments from Social Security are not considered income for purposes of the Means Test.
  • Current Monthly Income — Current monthly income is the average of all income received (except Social Security) in the six months preceding the month in which the bankruptcy case is filed.
  • Monthly Median Income — This figure varies by state, and is based on household size. The median income is the point at which half the households in the state earn more income, and half the households in the state earn less income, than the median amount.
  • Monthly Disposable Income — If a debtor’s current monthly income is more than the monthly median income of the state in which the debtor resides, then deductions for certain actual and allowable expenses are applied to calculate the debtor’s monthly disposable income. Certain deductions are based on Internal Revenue Service (IRS) standards, while others are based on the debtor’s actual expenses.

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What Is the Bankruptcy Means Test?

With certain exceptions, the Means Test is applied in all Chapter 7 bankruptcy cases to determine if filing under Chapter 7 would be “abusive”. If the debtor’s “annualized” current monthly income is less than the median income for New York State, then the debtor is eligible to file for Chapter 7 bankruptcy. If the debtor’s current monthly income is over the median income for New York State, then the debtor’s monthly disposable income, as defined above, must be calculated, in order to determine if the debtor passes the Means Test.

Under the federal Bankruptcy Code, if the debtor’s total monthly disposable income over a five year period (the debtor’s monthly disposable income multiplied by 60) is less than $7,700, then the presumption of abuse does not apply, and the debtor can file for Chapter 7 bankruptcy.

There is a rebuttable presumption that filing for Chapter 7 is abusive if the debtor’s total monthly disposable income over a five year period is greater than:

  • $12,850, or
  • 25% of the debtor’s non-priority unsecured debt, as long as the amount is at least $7,700.

Filing under Chapter 7 is not usually an option for debtors who fall into either of the preceding categories. However, because the means test creates a rebuttable presumption, a debtor may be still able to file under Chapter 7 if there are special circumstances shown as to why the debtor should still be able to file under this chapter.

If the debtor cannot overcome the presumption that filing for Chapter 7 is abusive, then the Chapter 7 case will be dismissed. Alternatively, the debtor can convert the case to a case under Chapter 13, if the debtor otherwise qualifies for Chapter 13.


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Median Income in New York

In most Chapter 7 cases, it is necessary to compare the debtor’s annualized current monthly income with the state’s median income for the same family size.

The following is the median income in New York State, based on family size, according to the U.S. Census Bureau:

  • One Person in Household, $49,086
  • Two People in Household, $62,451
  • Three People in Household, $72,074
  • Four People in Household, $88,747
  • For households exceeding four people, add $8,400 for each individual in excess of four

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Means Test Does Not Apply in Certain Chapter 7 Cases

The means test does not apply if:

  • The debtor is a disabled veteran whose indebtedness occurred primarily during a period in which the debtor was on active duty or while performing a homeland defense activity.
  • The debts incurred by the debtor are not primarily consumer debts (i.e. over 50% of the debts are business related debts).
  • The debtor was a member of the Armed Forces Reserves or National Guard who was on active duty or homeland defense for at least 90 days during the 540 days preceding the bankruptcy filing.

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Bankruptcy Means Test Resources in New York

Internal Revenue Service (IRS) – The IRS website has information regarding the standard deductions that are utilized in the bankruptcy means test.

U.S. Trustee Program – This part of the Department of Justice is responsible for overseeing the administration of bankruptcy cases and private trustees. This site has information about the program and the federal bankruptcy system in general.

Chapter 7 of the United States Bankruptcy Code – Title 11 of the United States Code, which is entitled “Bankruptcy,” contains the federal law regarding bankruptcy. The Code governs all bankruptcy cases in the United States. This link is directly to the laws pertaining to Chapter 7 bankruptcy.


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The Law Office of Andrew M. Doktofsky, P.C. | Long Island, New York Bankruptcy Means Test Lawyer

Contact The Law Office of Andrew M. Doktofsky, P.C. at 631-812-7020 for a free consultation about the bankruptcy Means Test, and how it applies to your particular situation. Andrew M. Doktofsky will conduct a Chapter 7 Means Test analysis at no charge, to determine if you are eligible to file for Chapter 7 bankruptcy.

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