New Income Thresholds Could Make Chapter 7 Bankruptcy More Accessible for Long Island Families in 2024

The landscape of Chapter 7 bankruptcy eligibility has shifted dramatically for Long Island residents in 2024, with median incomes in New York up $2,733 for a household of one, $3,461 for a household of two, $4,169 for a household of three and $5,195 for a household of four compared to previous guidelines. These significant increases mean that New Yorkers who are struggling financially may now qualify for Chapter 7 bankruptcy without being subject to the Means Test, and those who may have previously failed the Means Test may now qualify.

Understanding the 2024 Chapter 7 Means Test Changes

The means test serves as the gateway to Chapter 7 bankruptcy eligibility, and the means test is a crucial step in the Chapter 7 bankruptcy process, designed to establish objective standards for determining eligibility for relief. For many people, overcoming the means test is the main challenge to qualify for Chapter 7.

For Long Island residents, the new Means Test income figures for New York that are effective as of April 1, 2024, are as follows: Household of 1: $69,135 (prior figures $66,402 as of 11/1/23) Household of 2: $87,550 (prior figures $84,089 as of 11/1/23) Household of 3: $105,435 (prior figures $101,266 as of 11/1/23) Household of 4: $131,389 (prior figures $126,194 as of 11/1/23) Add $9,900 for each individual in excess of 4.

How the Means Test Works for Long Island Families

The Chapter 7 means test operates in two distinct phases. This compares your average monthly income from the past six months to your state’s median income for a household of your size. If your income is below the median, you pass the means test and can file Chapter 7.

If your household income exceeds these thresholds, you’re not automatically disqualified. If your income is above the median, the test moves on to your monthly expenses. After deducting allowed expenses, the court checks whether you have any money left over — called disposable income — that could be used to repay your debts.

What This Means for Long Island Residents

The income increases are particularly significant for Long Island’s high cost of living. About 90% of people who file for bankruptcy qualify for Chapter 7 based on income alone, without needing to complete the second part of the means test, and these new higher thresholds will likely increase that percentage for New York residents.

For those whose income still exceeds the median, various deductible expenses can help you qualify, including child care expenses for needed babysitting, daycare, or preschool expenses, involuntary deductions required for employment, such as mandatory retirement plans, union dues, or uniforms, and health, disability, or term life insurance.

When to Reconsider Chapter 7 Filing

If you previously explored Chapter 7 bankruptcy but were told you didn’t qualify due to income restrictions, such a debtor may now want to reevaluate whether they now qualify for Chapter 7 bankruptcy under the revised 2024 guidelines.

The timing of your filing matters significantly since the six-month lookback period refers to the six full calendar months before you file for bankruptcy, which the court uses to calculate your average monthly income for the means test. If your income has decreased recently due to job loss or reduced hours, waiting a few months might bring your average income below the median threshold.

Professional Guidance for Complex Cases

While these income increases offer new opportunities for debt relief, navigating the means test requires careful attention to detail. The Means Test calculation is complicated, and it is highly recommended that you contact an experienced bankruptcy attorney when in contemplation of filing for bankruptcy. This is especially the case when the Means Test is applicable for your case.

For Long Island residents facing overwhelming debt, consulting with a qualified chapter 7 attorney can help determine whether these new income guidelines make Chapter 7 bankruptcy a viable option. The Law Office of Ronald D. Weiss, P.C., located in Melville and serving Nassau and Suffolk Counties, has been helping Long Island families navigate bankruptcy law for over 30 years.

Looking Ahead: Future Changes

It’s important to note that the USTP typically releases new Means Test income figures, which relies upon data from the U.S. Census Bureau, in April and November. This means the income thresholds will continue to be updated regularly, potentially creating new opportunities for debt relief as economic conditions change.

The 2024 changes represent a significant opportunity for Long Island residents who have been struggling with overwhelming debt. With higher income thresholds and the potential for additional deductions, more families may now qualify for the fresh start that Chapter 7 bankruptcy provides. However, given the complexity of bankruptcy law and the importance of timing, consulting with an experienced bankruptcy attorney remains crucial for anyone considering this path to financial recovery.