Can You File Chapter 7 Bankruptcy If Your Income Exceeds Median Family Income?

In these uncertain economic times, I am getting this question more and more from people considering filing for bankruptcy all over Western New York.   So can someone in Rochester making more than $75,000 file for Chapter 7 bankruptcy?  The answer to that question is likely to be yes.

I have previously written about the means test component of the Chapter 7 bankruptcy.  Under BAPCPA, the means test and its income standards were designed to be a bright line dividing those that were able to file Chapter 7 bankruptcy from those who were forced to file Chapter 13 bankruptcy.  But the means test is more complicated than that, and the sheer median family income numbers alone are not alone dispositive, as discussed below.

The first Chapter 7 bankruptcy test the debtor has to pass in New York in order to qualify, is the Median Family Income test.  It is the test that most debtors have heard about.  Most debtors have heard about it from friends or relatives who filed for bankruptcy, usually along the lines “If you make over a certain amount, you can’t file.”  Like most things you hear, these statements are only partially correct.   The current Median Income limit in New York for a family size of one is $46,485.  For a family size of two, the amount is about $58,109.

So how can someone filing for bankruptcy in Rochester who earns over $75,000 possibly file for bankruptcy in New York?  The short answer is that BAPCPA, the bankruptcy law that was passed in 2005, allows you to take certain deductions when determining if you are qualified to file Chapter 7 bankruptcy.  You can take standard IRS deductions that your bankruptcy lawyer knows about.  You can deduct certain childcare expenses.  You can deduct taxes that are being garnished from your wages.  You can deduct your actual mortgage payments.  You can deduct vehicle ownership expenses.  You can deduct health care expenses.  You can deduct food expenses.  In other words, if you’re earning more than that median income test, you still absolutely have a possibility for filing for Chapter 7 Bankruptcy in Western New York.

While most of the deductions are technical in nature and require analysis of the debtor’s expenses and needs, I would recommend you speak with a Rochester bankruptcy lawyer and that lawyer will sit down with you and explain how the bankruptcy law requirements apply to you.  This is what makes a difference to the debtors since a bankruptcy attorney can help someone in difficult financially situations.   When meeting with the bankruptcy attorney, the debtor should discuss the full extent of his/her financial situation and when finished, should understand what course to take.

If you are dealing with debt problems in Western New York, including Rochester, Canandaigua, Brighton, Pittsford, Penfield, Perinton, Fairport, Webster, Victor, Farmington, Greece, Gates, Hilton, Parma, Brockport, Spencerport, LeRoy, Chili, Churchville, Monroe County, Ontario County, Wayne County, Orleans County, Livingston County, and being harassed by bill collectors, and would like to know more about how bankruptcy may be able to help you, contact me today by phone or email to schedule a FREE initial consultation with a bankruptcy lawyer.

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