There is good news for debtors considering filing for bankruptcy in New York. The Office of the U.S. Trustee Program (USTP) has released new Means Test income figures, and those figures have gone up. This means that more debtors will be able to qualify for Chapter 7 bankruptcy and for those debtors in Chapter 13, their plans may be shorter and possibly less expensive. The USTP is a part of the Justice Department and oversees the administration of bankruptcy cases. See 28 U.S.C. § 586 and 11 U.S.C. § 101. The USTP periodically releases median household income figures used to determine if the Means Test applies to a debtor seeking to file for Chapter 7 bankruptcy. These figures are also used to determine the length of a repayment plan and the monthly payment in Chapter 13 cases. The USTP typically releases new Means Test income figures, which relies upon data from the U.S. Census Bureau, in April and November. The new Means Test income figures for New York that are effective as of April 1, 2024, are as follows:
Household of 1: $69,135 (prior figures $66,402 as of 11/1/23)
Household of 2: $87,550 (prior figures $84,089 as of 11/1/23)
Household of 3: $105,435 (prior figures $101,266 as of 11/1/23)
Household of 4: $131,389 (prior figures $126,194 as of 11/1/23)
Add $9,900 for each individual in excess of 4.
The purpose of the Means Test is to determine whether debtors, with a majority of consumer debt, who have above the median income can afford to pay at least some of their debt back through a chapter 13 bankruptcy plan as opposed to discharging their debt through a chapter 7 bankruptcy filing. A debtor must compare their gross household income to the median household income for their household size in the state in which they live. The Means Test includes all gross household income but does not include benefits received by the debtor under the Social Security Act or from VA and DoD retirement or disability.
If a debtor’s gross household income is less than the median household income figures released by the USTP, then the Means Test does not apply, and they may qualify for Chapter 7 Bankruptcy. If the debtor’s income is above the median, they are then subject to the Means Test. These debtors will have to determine whether they pass or fail. When calculating the Means Test, the debtor subtracts the expenses in the test from their current monthly income. A debtor’s current monthly income is calculated by annualizing their average monthly income over the 6 months prior to filing, and then dividing it by 12 to get a monthly figure. The expenses in the test are mostly based not on the debtor’s actual expenses but instead by using national and local IRS living expense standards. The local standards are based upon the debtor’s county of residence. Debtors are allowed to use some of their actual living expenses when calculating in the Means Test, including mortgage, vehicle and other secured debt obligations, tax debt payments, court-ordered payments, and expenses related to the care of an elderly, chronically ill, or disabled family member. Unfortunately, depending upon what a debtor’s actual expenses are, the Means Test related expenses may not be very realistic. A debtor’s current monthly income is then subtracted from their Means Test expenses to determine if they pass the Means Test. If the debtor results show surplus income that could fund a Chapter 13 plan, they fail and are restricted to filing for Chapter 13 bankruptcy.
The Means Test calculation is complicated, and it is highly recommended that you contact an experienced bankruptcy attorney when in contemplation of filing for bankruptcy. This is especially the case when the Means Test is applicable for your case. We do not recommend the use of online Means Test calculators.
As the figures above show, the median household income figures in New York have increased compared with the prior figures. Median incomes in New York are up $2,733 for a household of one, $3,461 for a household of two, $4,169 for a household of three and $5,195 for a household of four. Accordingly, New Yorkers who are struggling financially may now qualify for Chapter 7 bankruptcy without being subject to the Means Test. It also means that New Yorkers who may have previously failed the Means Test may now qualify. Such a debtor may now want to reevaluate whether they now qualify for Chapter 7 bankruptcy. Even if a debtor still fails the Means Test and is restricted to filing for Chapter 13 bankruptcy, the new median income figures would likely offer them a slightly more affordable plan payment.
If you have any questions about filing for bankruptcy or the Means Test, please feel free to contact us at The Law Offices of David I. Pankin, P.C. We have over 28 years of experience helping debtors obtain a fresh financial start. You can schedule a free consultation at (888) 529-9600 or by using our easy online contact form.
