If you are thinking about filing for bankruptcy in New York, it is important to understand how recent updates to the bankruptcy means test figures may affect your eligibility to file for Chapter 7 bankruptcy. The means test is a budget test requirement in the bankruptcy code that applies to certain debtors seeking to file for bankruptcy. Debtors that have a majority of consumer-based debt (credit card debt, personal loans, mortgage balances, etc.) must complete a means test if their total household income is above the median income for the state in which they reside and are looking to file for Chapter 7 bankruptcy.
The U.S. Trustee Program, a division of the Department of Justice that oversees the bankruptcy process, has released new increased median family income figures that apply to cases filed on or after November 1, 2025. These updated income thresholds will allow more New Yorkers who are struggling with debt to potentially qualify for Chapter 7 bankruptcy as they fall below the median income levels that trigger the means test requirement.
In Chapter 7 bankruptcy, a debtor files a petition with the Bankruptcy Court and upon filing receives an automatic stay against all debt collection activity. Shortly thereafter, the debtor is required to appear at a hearing with the trustee assigned to their case. At the end of the process, their dischargeable debts are eliminated. The debtor receives a fresh start in a typically fast process that takes 4 to 6 months from a case filing to discharge.
In a Chapter 13 bankruptcy case, the debtor files a petition and proposed payment plan that is usually 60 months long in which a debtor is able to resolve all their debt. Similar to a chapter 7 case, they receive an automatic stay upon filing and also must appear at a hearing with the trustee assigned to their case. Within 30 days of filing, they must also start making plan payments to the trustee. Once the case is confirmed by the Court, the trustee starts paying the claims of the creditors in the case. Depending upon the circumstances of their case, a debtor may only be required to pay back just a percentage of their debit to creditors, and at the end of the process the debtor receives a discharge of their debt and a fresh start.
New Median Income Figures for New York
According to the U.S. Trustee’s updated “Census Bureau Median Family Income by Family Size” data, the new figures for New York are as follows:
- 1-person household: $71,393 (up from $68, 795)
- 2-person household: $90,520 (up from $89,130)
- 3-person household: $112,616 (up from $108,589)
- 4-person household: $135,475 (up from $134,443)
- Each additional household member: add $11,100.
These figures are now effective for all bankruptcy cases filed on or after November 1, 2025.
Why These Numbers Matter
This meaningful update to the median income figures means that more New Yorkers may potentially qualify for Chapter 7 bankruptcy, since if they are under the median income for their household size, the means test does not apply. If your average monthly income (calculated over a six-month period prior to the month of filing) is below the median, you typically qualify for Chapter 7 and can move forward to seek a discharge of your eligible debts. If your income is above the median, then the means test applies and the process continues to a second stage that evaluates your expenses using mainly IRS local and national standards (instead of your actual expenses).
If you pass the test, you may qualify for Chapter 7, but if you fail, you are restricted to Chapter 13 bankruptcy. The means test is also used to determine the minimum plan payment requirement in a Chapter 13 bankruptcy filing. Fortunately, these updated figures shift the baseline for many New York residents considering bankruptcy in favor of Chapter 7. Please note that there are situations where a debtor who qualifies for Chapter 7 bankruptcy would want to file for Chapter 13 bankruptcy instead. For example, if the debtor has non-exempt assets that would be unprotected in a Chapter 7 bankruptcy or if the debtor has disposable income in their budget that could be used to fund a Chapter 13 plan (this is commonly seen where the debtor pays no or very low rent).
How is Household Income Calculated in the Means Test?
In computing the means test, all a debtor’s household income is required to be included with explicit exceptions only for Social Security, VA and DoD benefits. For debtors that are married, their spouse’s income would also have to be included as part of the household income even if they are not filing for bankruptcy. Upon completing the calculation, if a debtor’s means test result shows negative income in their monthly budget, they “pass” the test, and they can qualify to pursue Chapter 7 bankruptcy. However, If the debtor has a meaningful surplus of income in their budget, they “fail” the test, and are restricted to a Chapter 13 bankruptcy filing.
The calculation of “current monthly income” can be complex. It includes all sources of gross income for the household (except for Social Security, VA and DoD benefits), averaged over the six months before filing. This number may differ from the income reported on your tax returns. It includes income from a spouse, overtime, bonuses, commissions, child support, etc. The median income numbers apply statewide, and do not vary by region even though New York is a large and economically diverse state. However, cost-of-living differences between New York City, Long Island, and upstate regions are reflected in the IRS local standards used in the means test which can influence the results of the means test.
Key Takeaways for New York Debtors
- The increases in median income were meaningful and may enable more New Yorkers struggling with debt to potentially file for bankruptcy.
- Being over the median income threshold does not necessarily disqualify you from Chapter 7 bankruptcy. Many debtors above the median income for their household size pass the means test depending on additional allowable expense deductions, secured debts, disposable income calculations and other factors.
Contact The Law Offices of David I. Pankin, P.C.
The updated New York means test figures take effect for cases filed on or after November 1, 2025, and may impact your bankruptcy options. However, these numbers alone do not tell the full story, each case requires a personalized review of a debtor’s income, expenses, liabilities, assets, and goals. If you are considering filing for bankruptcy in New York, do not rely solely on online tools or chatbots. You should speak with an experienced New York bankruptcy attorney who can help you understand your eligibility and chart the right path toward financial relief. Contact the Law Offices of David I. Pankin, P.C. today to schedule a free consultation and learn how the new means test figures affect your options for Chapter 7 or Chapter 13 bankruptcy. We have over 28 years of experience and have filed over 15,000 bankruptcy cases. Call us today at 888-529-9600 or by using our easy online contact form.
