The New York Bankruptcy Means Test determines your eligibility to file a Chapter 7 bankruptcy. The test compares your income to a family the same size as yours. If your average income is lower than that of the New York median, you may file under the Chapter 7 bankruptcy code. The New York Bankruptcy Means Test was created to only allow those filers who truly cannot pay back debt file for a Chapter 7 bankruptcy. Bankruptcy filers who primarily have consumer debts, not business debts, need to take the New York Bankruptcy Means Test.
If your median income exceeds the New York median, you are obligated to undergo the remaining parts of the New York Bankruptcy Means Test to ascertain if you are able to repay part of your unsecured debts under the Chapter 13 bankruptcy code. To determine if your income level meets the requirements to pass the New York Bankruptcy Means Test, you have to divide the sum of income over the past six months prior to filing bankruptcy by six. If you earn more than the median income for New York, the next step is to determine whether you will have sufficient disposable income to pay off debt after basic expenses have been paid. This is done by subtracting your expenses from your income. If your disposable income exceeds a certain amount, you cannot file for a Chapter 7 bankruptcy.
If you do not meet the requirements of the Means Test to file for a Chapter 7 bankruptcy, you have to file for a Chapter 13 bankruptcy. In a Chapter 13 bankruptcy, your disposable income will be used to pay back all or a portion of your debt over either three or five years according to a strict budget that will be overseen by the Court.
It is essential to note that just because you pass the New York Bankruptcy Means Test does not mean that you have to file for a Chapter 7 bankruptcy. Before filing for a Chapter 7 bankruptcy it is essential to consider alternatives and all other factors that may affect your case. Each bankruptcy case is unique and in some cases it may be more sensible to file for a Chapter 13 bankruptcy instead if a Chapter 7 bankruptcy. For example, those bankruptcy filers who are attempted to keep valuable property or who want to prevent foreclosure on their homes, a Chapter 13 bankruptcy may be a more favorable option. If you have a large amount of consumer debt such as credit cards, medical bills, payday loans as well as other dischargeable debt, a Chapter 7 bankruptcy may eliminate that debt.
It is also important to keep in mind that creditors must be paid at the very least what they would have been paid in a Chapter 7 bankruptcy if you decided to file a Chapter 7 bankruptcy.