Do I Qualify to File Chapter 7 Bankruptcy?
To qualify for a Chapter 7 Bankruptcy, you must first pass the “Means Test,” which requires that your income not exceed a certain amount. This test requires that you first add up your income earned during the six previous complete months. Next, add up all of the income from all sources in your household, including yours and the income of the other members of your household during the same six-month period. Certain types of income, such as social security, are not included in your calculations. Then, multiply the resulting number by 2 to obtain your yearly income.
Once you have determined your yearly income, compare it to the median income for your state. These figures are updated every May 1st and November 1st. As of November 1, 2018, the amounts in New York are as follows: The median income for a family of 1 is $ 54,014; for a family of 2, $69,642; for a family of 3, $81,887; and for a family of 4, $99,943. For households with more than 4 family members. $8,400 is added for each additional family member. If your yearly income is no more than the median income you will qualify for a Chapter 7 Bankruptcy.
As of November 1, 2018, the amounts in New Jersey are as follows: The median income for a family of 1 is $ 66,719; for a family of 2, $80,302; for a family of 3, $101,163; and for a family of 4, $122,474. For households with more than 4 family members. $8,400 is added for each additional family member. If your yearly income is no more than the median income you will qualify for a Chapter 7 Bankruptcy.
If your income exceeds the median income in your state, all is not lost. There is a second step that allows you to deduct certain expenses from your income. This part is not as straight forward. Most of the expenses that may be included are not your actual expenses, but the average expense for someone living in the county in which you reside. These expenses can be found on the website of the U.S. Department of Justice.
You are also allowed to include certain types of actual expenses, however they are limited to certain types of expenses and limited by amounts. After applying your expenses, if your net income does not exceed the allowed amount, you will pass the “Means Test.”
If your income exceeds the allowed limits, you may still pass the Means Test, if your income exceeds the allowed amount by no more than $128.33 per month.
If your income exceeds the allowed limited by more than $128.33 per month, but no more than $214.16 per month you can still pass the means test if the amount that you are over would not be enough to pay at last 25% of your unsecured and non-priority debt over a 5-year period.
After completing the Means Test, if you are still above the allowed income limit, you will not qualify for a Chapter 7 Bankruptcy. In that case, you will have to look to Chapter 13 Bankruptcy for relief.
If you pass the “Means Test,” you must still pass the budget analysis of your actual income and expenses. If you have too much discretionary income you won’t be able to file a Chapter 7 Bankruptcy, and instead look to Chapter 13 Bankruptcy for relief.
As you can see from this short summary, this is a complicated area of the law. You risk much if you make an error. To find out if Chapter 7 Bankruptcy is right for you, it is best to consult with an experienced bankruptcy attorney.
We have helped thousands of people like you get a fresh financial start through bankruptcy. Call us now at (718) 625-0800 to schedule your free consultation. You can also reach us online.