Understanding the Means Test for New York Chapter 7 Bankruptcy Fillings
Chapter 7 bankruptcy is often filed by individuals or businesses that do not have significant assets and investments.
The reason for this is that chapter 7 provides for "liquidation" of assets.
Any property that is non-exempt by law may be sold by a bankruptcy trustee and the proceeds distributed amongst creditors.
The process for filing Chapter 7 bankruptcy is determined by both federal and state law in New York, up to and including exemptions.
Under New York Bankruptcy Code, Chapter 7 bankruptcy can be filed by individuals and business entities such as partnerships or corporations.
The person or business must then pass what is called a "means test," which determines whether or not the debtor's filing would be "abusive.
" The means test analyzes the debtor's average monthly gross income (from all sources minus social security) for the 6 months prior to filing.
In the case of married debtors, this includes the spouse's monthly household income, regardless if the spouse is filing for bankruptcy or not.
Should the debtor's average monthly income be over the median income for a household in New York, then the monthly disposable income will be determined.
According to the Census Bureau, the median household income in New York is currently: • $45,931 for a one person household • $56,113 for a two person household • $66,953 for a three person household • $81,212 for a four person household • Add $7,500 for each household in excess of four If an individual debtor has an average monthly disposable income that is too high, he or she may not be allowed to file for bankruptcy.
It would be considered "abusive" in New York for a person to file for bankruptcy if his or her disposable monthly income in the previous 5 year period is more than $11,725 or 25% in non-secured debt (of debt over $7,025).
Please note that this means test does not apply to: • Disabled veterans who are pursuing bankruptcy due to debt occurred while on active duty; • Debts, of which over 50% are business related; or • Members of the Armed Forces Reserves or the National Guard who were on active duty for a minimum of 90 days in the 540 days prior to filing bankruptcy.
Certain persons are generally not eligible to file for bankruptcy under Chapter 7.
This includes a debtor with a pending bankruptcy case within the previous 180 days or a debtor who had the bankruptcy proceeding dismissed after a request by a creditor for automatic stay.
It also includes a debtor who had a case previously dismissed by the court for failure to appear or abide by court orders.
However, the means test is not the final say in whether or not a person can file for bankruptcy.
The means test creates a rebuttable presumption on a person's eligibility, which means that it can be contested if the debtor has special circumstances and can prove that he or she can file for bankruptcy.
If the debtor does not meet the eligibility requirements for chapter 7, he or she can alternatively choose to pursue chapter 13 bankruptcy instead.
The reason for this is that chapter 7 provides for "liquidation" of assets.
Any property that is non-exempt by law may be sold by a bankruptcy trustee and the proceeds distributed amongst creditors.
The process for filing Chapter 7 bankruptcy is determined by both federal and state law in New York, up to and including exemptions.
Under New York Bankruptcy Code, Chapter 7 bankruptcy can be filed by individuals and business entities such as partnerships or corporations.
The person or business must then pass what is called a "means test," which determines whether or not the debtor's filing would be "abusive.
" The means test analyzes the debtor's average monthly gross income (from all sources minus social security) for the 6 months prior to filing.
In the case of married debtors, this includes the spouse's monthly household income, regardless if the spouse is filing for bankruptcy or not.
Should the debtor's average monthly income be over the median income for a household in New York, then the monthly disposable income will be determined.
According to the Census Bureau, the median household income in New York is currently: • $45,931 for a one person household • $56,113 for a two person household • $66,953 for a three person household • $81,212 for a four person household • Add $7,500 for each household in excess of four If an individual debtor has an average monthly disposable income that is too high, he or she may not be allowed to file for bankruptcy.
It would be considered "abusive" in New York for a person to file for bankruptcy if his or her disposable monthly income in the previous 5 year period is more than $11,725 or 25% in non-secured debt (of debt over $7,025).
Please note that this means test does not apply to: • Disabled veterans who are pursuing bankruptcy due to debt occurred while on active duty; • Debts, of which over 50% are business related; or • Members of the Armed Forces Reserves or the National Guard who were on active duty for a minimum of 90 days in the 540 days prior to filing bankruptcy.
Certain persons are generally not eligible to file for bankruptcy under Chapter 7.
This includes a debtor with a pending bankruptcy case within the previous 180 days or a debtor who had the bankruptcy proceeding dismissed after a request by a creditor for automatic stay.
It also includes a debtor who had a case previously dismissed by the court for failure to appear or abide by court orders.
However, the means test is not the final say in whether or not a person can file for bankruptcy.
The means test creates a rebuttable presumption on a person's eligibility, which means that it can be contested if the debtor has special circumstances and can prove that he or she can file for bankruptcy.
If the debtor does not meet the eligibility requirements for chapter 7, he or she can alternatively choose to pursue chapter 13 bankruptcy instead.
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