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The 2005 amendments to the Bankruptcy Code introduced the "means test" for eligibility for chapter 7. An individual who fails the means test will have his or her chapter 7 case dismissed or may have to convert his or her case to a case under chapter 13. An individual chapter 7 debtor with primarily consumer debts will be subject to the means test if his or her "current monthly income" (based on average monthly income for 6 months prior to bankruptcy) is above the median income for a family of the same size. Currently, in New York this means the debtor's income on an annual basis cannot be greater than $46, 523 for an individual ($57,006 for a family of 2, $67,991 for a family of 3 and $83,036 for a family of 4). Current monthly income includes regular contributions to household expenses from a non-debtor but does not include social security income.
If the debtor's income is below the median income, the debtor is eligible for chapter 7 bankruptcy. If the debtor's income is greater than the median income listed above, the debtor must past the "means test". The means test starts with the debtor's monthly current income (based on income for last 6 months) and subtracts (1) expenses for food, clothing, utilities, transportation and housing based on permitted monthly expenses specified by IRS standards (not the debtor's actual expenses), (2) average monthly secured debt payments, (3) average monthly priority debt payments, and (4) a few other expenses in certain limited categories, such as educational expenses of dependents of the debtor, and expenses to care and support elderly, chronically ill, or disabled household members. The remaining net amount after deducting these expenses is the debtor's "disposable income."
In addition, no individual may be a debtor under chapter 7 or any chapter of the Bankruptcy Code unless he or she has, within 180 days before filing, received credit counseling from an approved credit counseling agency either in an individual or group briefing.
Just because you qualify under the means test does not necessarily mean you should file for Chapter 7 bankruptcy. It merely means that you can. Any decision to file for Chapter 7 bankruptcy should only be made after consulting with an experienced bankruptcy lawyer.
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