Bankruptcy Means Test in Staten Island
If you are falling behind on bills and can’t seem to get back on your feet filing for a Chapter 7 Staten Island bankruptcy may be an option to help you start over. It is important to understand that if you have found yourself in this position, you are not alone, and seeking help to get back on the right path means you already are taking the proper steps to eliminate your debt and get a fresh start!
In 2017, bankruptcy filings in the United States were down but not in New York. In Richmond County Staten Island, Chapter 13 cases increased significantly. The rate of peoplee 65 and older filing for bankruptcy is three times what it was in 1991.
Many times, people filing for bankruptcy automatically associate negative thoughts with the process, and assume their lives are forever ruined. Instead, bankruptcy should be looked at as a tool that will help you get back on your feet. In fact, bankruptcy laws were enacted to help the “honest” but “unfortunate debtor” get a fresh start. Unfortunately, life is unpredictable and some times unforeseen circumstances are inevitable. Medical bills, divorce, and loss of employment are some of the top reasons why people file a Staten Island bankruptcy.
In 2005, Congress reformed the bankruptcy laws to prevent people from filing fraudulent bankruptcy petitions and abusing the system. One of Congress major changes was the additional requirement of the Means Test that debtors must pass in order to file bankruptcy in Staten Island/ New York. The implementation of the Means Test made it more difficult for people to file bankruptcy because people now had to fall below a certain income level in order to file a Chapter 7 bankruptcy and have their debts eliminated. Introducing the means test made people who earned “too much” money, file for Chapter 13 bankruptcy instead. Unlike, a Chapter 7 bankruptcy in a Chapter 13 bankruptcy people have to pay a percentage back to their creditors over a certain amount of time.
Qualifying for a Chapter 7 Bankruptcy in Staten Island
Chapter 7 bankruptcy, is the most popular type of bankruptcy because it is quick and allows you to eliminate your debt without having to pay anything back to your creditors. Unfortunately, not everyone can file a Chapter 7 Staten Island bankruptcy. In order to qualify for a Chapter 7 bankruptcy, you must pass the bankruptcy Means Test in Staten Island. The bankruptcy Means Test, is a tool used to determine who can file a Chapter 7 bankruptcy in Staten Island and have their debts forgiven. The Chapter 7 Means Test takes into account your income, expenses and family size to determine whether or not you qualify for a Chapter 7 Bankruptcy. The bankruptcy Means Test determines if your monthly income is below the median income for a family of your size in New York. If your income is above New York’s median income, then you will have to go to the second part of the Means test, which is quite more complicated and takes into consideration your disposable income after your monthly expenses. If you still do not qualify, then filing a Chapter 13 bankruptcy may be in your best interest.
Filing a Chapter 13 Bankruptcy in Staten Island
Although, you may not want to file a Chapter 13 because you will have to pay back your creditors, a Chapter 13 bankruptcy can be beneficial. Often times unsecured creditors, do not need to get paid their full amount. This means that, even though you have to pay them back it may not be much. Further, filing a Chapter 13 bankruptcy allows you time to get back on your feet and stops creditors from charging interest.
In order to calculate your household median income under the means test you will need all sources of income. This includes: alimony, child support, rent, pension, social security, unemployment and family contributions. Note, that if you own a business you will need to provide the Court with a profit and loss statement. Further, if you receive pay stubs you will need to calculate your income using your gross income (your income before taxes). After you have your income you will need to add up all sources for the last six months. The means test uses your average income within the last six months to determine if you qualify for a Chapter 7 bankruptcy in New York.
Qualifying under the Means Test does not mean you should file a Chapter 7 bankruptcy
A Staten Island bankruptcy lawyer can help you decide if a Chapter 7 bankruptcy is the right choice for you. Aside from qualifying under the means test, you will also need to know if your property is exempt. In New York, if you file bankruptcy certain property can be exempt which means you can file bankruptcy and still keep your property. It is important that you discuss your situation with a bankruptcy lawyer if you have property. If you file your bankruptcy case and your property is not exempt the Court can take your property and sell it to pay off your creditors.
Bankruptcy Forms I and J income and Expenses
The Court will also look at Schedules I and J to determine your income versus your expenses. If you have a significant amount of monthly income left over, the Bankruptcy Court could require you to convert your case from a Chapter 7 to a Chapter 13. Moreover, if your debts are primarily business debts then you may be exempt from having to qualify under the means test at all! New York Bankruptcy law states that if your debt is mostly debt due to business then you can file a Chapter 7 bankruptcy without having to qualify under the Means Test.
Now, lets take a look at an example:
William and Keisy are marred. William works and Keisy is a stay at home mom. Keisy and William have no assets. William Makes $100,000 a year and they have two children. William and Keisy are a household of four. Since the median household income for New York with a household of four is $102,384.00 they qualify for a Chapter 7 bankruptcy.
Now lets look at another example:
William and Keisy are married with four children. Both Keisy and William work and make $175,000 per year. William and Keisy are not able to qualify for a Chapter 7 because their median household income is above the $102,384.00. However, if we change the facts and say that William owned a restaurant that failed and all of his debt is from his restaurant then he will qualify for a Chapter 7 bankruptcy.
In order to determine if you qualify, you can use the chart below which shows the median income in 2019 to compare your family size with the median income levels in New York. It is important to note that these numbers change every few months. Further, the median income varies by each state and county so please make sure you are using the correct numbers.
New York Median Income 2020 Limits
Household Size Median Income In New York
1 $56,120.00
2 $71,349.00
3 $86,670.00
4 $105,636.00
5 $114,636.00
6 $123,636.00
7 $132,636.00
Many times people are under a misguided impression that if you own a home then you automatically can not file for a Chapter 7. This is not true. New York Bankruptcy law provides homestead exemptions which allow you to file a Chapter 7 bankruptcy even if you own a home.
It is important to understand that qualifying for the Means Test in New York is essentially what determines what Chapter of bankruptcy you can file. However, this test is not the end all there are also other factors that need to be taken into consideration. If you are unsure what chapter of bankruptcy you should file you should consult with a Staten Island bankruptcy lawyer who can point you in the right direction. Karra L. Kingston Esq. is a bankruptcy lawyer in Staten Island and New Jersey. Ms. Kingston has represented numerous clients with overwhelming debt and helped them to get a fresh start. Contact the office today to get a free consultation.