Chapter 7 bankruptcy is what most people think of when they hear the word bankruptcy. It is also known as liquidation bankruptcy because the courts potentially have the right to force you to sell certain assets to partially pay back your creditors once you initiate Chapter 7 proceedings as a way to offset the fact that repayment is otherwise not required.
In order to qualify for Chapter 7 bankruptcy, you have to pass what is known as a means test. After adjusting your income for certain costs and expenses, the final figure must remain at or below the state median for your household size. These figures constantly get adjusted, so it’s important to familiarize yourself with income allowances for those filing after April 1, 2020, if you think you may soon file for Chapter 7 protection in New York.
The larger your family, the greater your income can be
The median income in New York for a single person with no dependents is currently $57,137. If you have one child or if you choose to file bankruptcy jointly with your spouse, your household income can be as high as $72,642 after adjustment. For households with three members, the maximum adjusted income increases to $88,240, while families of four can potentially earn as much as $107,550 and still qualify for Chapter 7 bankruptcy.
If you meet or come very close to meeting these income guidelines, Chapter 7 bankruptcy and the rapid discharge it offers may be an option for you if you can’t pay off your credit card, medical or other unsecured debts.