New York Bankruptcy Law
FANNING & HUGHES: New York Bankruptcy Law Firm
If you are suffering under the burden of debt, an experienced New York bankruptcy lawyer from Fanning and Hughes can give you a fresh financial start. The New York bankruptcy lawyers at Fanning and Hughes can help you file for bankruptcy under Chapter 7 or Chapter 13.
The Means Test - Do I qualify for Chapter 7 Bankruptcy?
A look at your Current Monthly Income
Under the current bankruptcy rules, the first step in figuring out whether you are eligible for Chapter 7 is to calculate your “current monthly income", or CMI. Your CMI is your average income over the six months before you file – not what you are presently making. You don't include Social Security retirement and disability payments. For those filing for bankruptcy because they recently lost their job, their CMI under these rules will be much more than they are actually receiving at the time they file for bankruptcy.
Compare CMI to the median income where you live
The law then compares your CMI to the median income for a family of your size in your state. (You can find median income tables at the website of the United States Trustee, www.usdoj.gov/ust; under "Means Testing Information."
If your income is less than or equal to the median, you can probably file for Chapter 7. If it is above the median, however, you must pass "the means test" -- another requirement of the new law -- in order to file for Chapter 7.
The Means Test
The purpose of the means test is to determine whether you have enough extra income, after subtracting allowed expenses and required debt payments, to repay a portion of your unsecured debts.
We start again, with your CMI, calculated as described above. From that amount, you subtract both of the following:
- Certain allowed expenses, amounts set by the IRS. Paradoxically, you cannot subtract what you actually spend on transportation, food, clothing, and so on. Instead, IRS figures must be used.
Monthly payments you will have to make on certain debts. These include secured and priority debts. Secured debts are those where a creditor is allowed to take the property if you don't pay (such as a mortgage or car loan). Priority debts are debts the law considers so important that they are entitled to be at the head of the repayment line. Typical priority debts include child support, alimony and taxes.
If your monthly disposable income after subtracting these two amounts is less than $100, you pass the means test, and will probably be allowed to file for Chapter 7.
If your monthly disposable income is more than $166.66, you have flunked the means test, and cannot qualify for Chapter 7.
If your monthly disposable income is between $100 and $166.66, and that is enough to pay more than 25% of your unsecured, nonpriority debts (credit card bills, student loans, medical bills, and so on) over a five-year period, then you flunk the means test, and Chapter 7 won't be available to you. If it is not enough to pay more than 25% of your unsecured, nonpriority debts over a five-year period, then you pass the means test, and Chapter 7 remains an option.
Next >> The Automatic Stay
We are a federally designated debt relief agency helping people file for relief under the bankruptcy code.
FANNING & HUGHES, PLLC
108-18 Queens Blvd -
4th Floor
Forest Hills, NY 11375
718.261.3290
contact@FHLawOffice.com
