Chapter 7 Bankruptcy Means TestFriday, January 13th, 2017, 1:35 am
Filing Chapter 7 bankruptcy can be extremely beneficial for individuals trying to get out from under the pressure of debt. While Chapter 7 wipes away your debt and allows you to start fresh, it isn’t an available option for all individuals. If you have enough money to repay your debts under Chapter 13 bankruptcy, you will be unable to file for Chapter 7.
The New York Chapter 7 means test allows you to determine whether or not you qualify to file for Chapter 7. If you’re unsure of whether or not Chapter 7 or Chapter 13 is right for your financial needs, the means test can help you see what fits your situation best.
How Does the Chapter 7 Means Test Work?
The means test is a way for New York City residents to determine if they qualify for Chapter 7 bankruptcy by figuring out how much money is left after necessary expenses. Through determining household income compared to household expenses, those considering Chapter 7 bankruptcy can find whether or not it is a viable option for them.
To begin the Chapter 7 means test, you must calculate your entire household income for an entire year, which may include more than just your traditional salary. Your income may also include rental income, unemployment income, income from investments, or income from a retirement plan or pension.
Once your income has been calculated, you should subtract your necessary expenses for the year. Any obligations you must pay will be included in the expense category. Subtract your expense amount from your income amount.
If the means test states that you will have less than $7,475 left over for the next 60 months, you pass the means test and can file for Chapter 7 bankruptcy. If your disposable income calculated by the means test is between $7,475 and $12,475, you will need to do additional research to determine if Chapter 7 fits your needs. If the means test calculates that your disposable income is over $12,475, you will need to file Chapter 13.
Is the Means Test Required for All?
Not everyone in New York is subject to the means test. Individuals who make less than the median salary for a household of their size will not need to perform the means test to know if they qualify for Chapter 7. Disabled veterans or veterans who incurred debt while on duty also do not need to do the means test.
If you’re unsure whether or not you qualify for Chapter 7 bankruptcy, contact an expert Brooklyn bankruptcy attorney to discuss your needs. The attorneys at Michael F. Kanzer & Associates, P.C. can help you determine the best bankruptcy option for you.