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The Means Test and the Unemployment Trap

venusflytrapRising unemployment in the U.S. has made the “means test” all the more significant for individuals considering filing for bankruptcy in New York and elsewhere.

The means test refers to the eligibility requirement under the 2005 bankruptcy law.  To be eligible to file for Chapter 7 bankruptcy in New York, an individual’s income must be equal to or below the median income for the state of New York.

FYI, the median income for the state of New York is as follows:

  • One person – $46,523
  • Two-person family – $57,006
  • Three-person family – $67,991
  • Four-person family – $83,036
  • Add $6,900 for each individual in excess of four people

It’s important to note that a debtor’s income is based on the previous six months.  That means that if you lose your job and need to file for Chapter 7 bankruptcy, then you may need to wait several months before you are eligible.   At the same time, this leaves debtor in a Catch-22 situation.  if you have no income, then it’s going to be hard to convince the trustee that you can fund a Chapter 13 bankruptcy, which is in essence a repayment plan.

In other words, your best option might be to simply wait a few months before filing for Chapter 7.  Even if you’re drowning in debt.

But don’t give up!  If you sit down with an experienced bankruptcy lawyer in New York for a free initial consultation (and remember, a good bankruptcy lawyer should offer a free initial consultation), then your bankruptcy lawyer can help you figure out if there are ways to characterize your income in ways that will be helpful to your situation and your needs.

If you’re considering filing for bankruptcy in New York, preparation and pre-bankruptcy planning can be critical to your case.  So get in touch for a free initial consultation where you can explain your situation, ask questions and most importantly, get answers.  There are always solutions and alternatives.  It’s just a matter of thinking them through with an experienced bankruptcy lawyer Brooklyn NY.

Rosenberg, Musso & Weiner, L.L.P
26 Court St # 2211
Brooklyn, NY 11242, USA

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