As a single person living alone in New York with a salary of $45,000, do I qualify for bankruptcy and, in particular, chapter 7?
Income and The Means Test
Assuming that your total income is less than $46,320 (which is New York State’s median income for a single person), you should pass what is referred to as the “means test.” (The means test is an income based formula designed to restrict the number of people who can file for bankruptcy so that bankruptcy relief is afforded to individuals who are financially in need. It was adopted as part of the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA), the law enacting several significant changes to the United States Bankruptcy Code.)
Even if you earned income above $46,320, you might still be able to pass the means test, particularly if you are obligated to pay secured debt, such as mortgage debt on a condominium or house, a secured loan on a cooperative apartment and/or an automobile loan.
Issues with Keeping Your Property
Your decision to file a chapter 7 or a chapter 13 will depend largely on whether you have assets you wish to retain and the amount of equity in such assets. In New York, for instance, you are entitled to an automobile exemption of $2,400 above all liens. So for example, if you owned a car, free and clear of liens, which was valued at $15,000, in order to retain your car in a chapter 7, you would have to reach an agreement with the chapter 7 trustee assigned to the case to purchase the equity of $12,600 or for some settlement amount. If that car, however, had a lien against it for $12,600, you would be able to retain the car without paying anything to the trustee. This is because you are entitled to keep $2,400 of the equity in the car. In the first example, even though you qualified for a chapter 7 in terms of your income, if you are desirous of retaining your car, you might nevertheless choose to file a chapter 13, which is a payment plan over 3 or 5 years, depending on your circumstances or discuss some other alternatives with bankruptcy counsel.
Talk to a Bankruptcy Lawyer in your state if you are considering bankruptcy or other debt relief options.
The foregoing does not constitute legal advice or constitute an attorney/client relationship.
