Jeffrey M. Rosenblum, P.C.
A Fresh Start

How will the means test affect your bankruptcy filing?

If you have decided to move forward with filing for bankruptcy in order to address your overwhelming debt, you should feel a sense of accomplishment. Even taking the first step toward debt relief in deciding to proceed with bankruptcy can prove difficult for most people. Therefore, you may already have started yourself on a path to a better financial situation simply by making this decision.

Next, your circumstances will determine what type of bankruptcy suits your situation. Even if you hope to file for a particular type of bankruptcy, such as Chapter 7 or Chapter 13, the details of your case will act as the true deciding factor on which avenue suits your case.

The means test

If you hope to file for Chapter 7, or liquidation, bankruptcy, you must pass the means test. This test reviews various aspects of your financial situation in order to determine whether your income makes Chapter 7 a fitting solution. Your average monthly income for a six-month period will go into a comparison with your state's median family income. If your income meets the state median or falls below that amount, you will likely pass the means test and qualify for liquidation bankruptcy.

Numerous factors may play into determining your income, including:

  • Wages or salary
  • Professional gross income
  • Interest
  • Royalties
  • Rental property income
  • Retirement income
  • Child or spousal support
  • Workers' compensation
  • Unemployment compensation

Other types of income may also go into consideration. Additionally, certain financial aspects do not play a role in your income, such as:

  • Tax refunds
  • Social Security benefits
  • Temporary assistance

After passing the means test, you may have the ability to move forward with your Chapter 7 process.

Too much income

If the means test determines that your income exceeds the state median and you do not pass the means test, you still have bankruptcy options. You may have the ability to file a Chapter 13 bankruptcy petition in order to repay your debts over time rather than utilizing liquidation to pay back outstanding balances.

In order to better understand the means test and your bankruptcy options, you may wish to consult with a knowledgeable New York attorney. By having such assistance, you may find that you have special circumstances that could affect your means test or, at the very least, you will gain an advocate willing to work with your best interests in mind for finding a brighter financial future.

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