When debtors are struggling financially and are contemplating filing for bankruptcy, they must determine what Chapter of bankruptcy to file. Chapter 7 bankruptcy allows debtors to achieve a fast financial fresh start by discharging their debts, while Chapter 13 bankruptcy requires debtors to pay at least a percentage of their debt in a Court confirmed payment plan, depending upon the circumstances. If a debtor is seeking to file Chapter 7, they must determine if they qualify. The first question that arises is whether they are subject to the Means Test (11 U.S.C. § 707). The Office of the United States Trustee periodically releases median household income figures used to determine whether the Means Test applies to a debtor with a majority of consumer debt who is looking to file for bankruptcy. If such a debtor’s monthly income is above these figures they are subject to the Means Test. These income figures rely upon data from the U.S. Census Bureau. The latest Means Test income figures for New York, as of 11/1/2024, are as follows:
Household of 1: $66,824
Household of 2: $86,501
Household of 3: $105,478
Household of 4: $130,591
Add $9,900 for each individual in excess of 4.
The median household income figures for New York have decreased slightly across the board. This decrease did not make sense to us at first, since unemployment is low, and we have seen the wages of our clients increase slightly. According to the NY Department of Labor, New York City’s seasonally adjusted unemployment rate was 5.3 percent in September 2024, which is only up 0.1 percent since August 2023. Furthermore, New York State’s average unemployment rate was only 4.4 percent in September 2024 (compared to a 4.1% national rate as of October 2024). Locally, wages and salaries advanced at a 3.0 percent rate for the 12-month period ending in September 2024 (compared with a Nationwide average of 3.8 percent over the same period), according to the Bureau of Labor Statistics. However, averages can hide inequities within our system. For example, a large portion of this wage growth may be in low-income households due to the increase in the minimum wage earlier this year. These households would not be subject to the Means Test with increases in wages. Wages can see increases, but the overall average wage can go down slightly.
What this means is that more New Yorkers who are struggling financially may not qualify for Chapter 7 Bankruptcy due to being subject to the Means Test. Furthermore, it also means that New Yorkers who have previously passed the Means Test may now fail. Furthermore, if a debtor is restricted to filing for Chapter 13 bankruptcy, these new median income figures may lead to a slightly more expensive plan payment.
If you have any questions about qualifying for Chapter 7 bankruptcy, please feel free to contact us at The Law Offices of David I. Pankin, P.C. We have over 25 years of experience helping debtors obtain a fresh financial start and have been handling means test cases since Congress revised the Bankruptcy Code in 2005. You can contact our office at (888) 529-9600 or by using our easy online contact form.
US Trustee Means Test Figures as of 11/1/2024:
https://www.justice.gov/ust/eo/bapcpa/20241101/bci_data/median_income_table.htm
For more information regarding the Means Test:
https://www.debtlawyer.com/what-is-the-means-test-in-bankruptcy/
More information on labor statistics:
https://www.bls.gov/regions/northeast/news-release/employmentcostindex_newyork.htm
