There are two basic bankruptcy tests for chapter 7 eligibility.
The first is the Median Income Test. You are automatically eligible for chapter 7 if your household income is not more than the Median Income for your size household in your state. This amount changes periodically. As of April 1, 2016, here are the numbers in New York:
Household of 1: $49,086
Household of 2: $62,451
Household of 3: $72,074
Household of 4: $88,747
Household of 5: $97,147
Household of 6: $105,547
The number increases to $8,400 for each additional member.
The second is the Means Test. Even if you don’t pass the automatic eligibility test, because you and your household members make too much, you may still be able to file for chapter 7 if you pass the Means Test.
This “test” says that you are not allowed to file for chapter 7 if you have the “Means” to pay at least 25% of your unsecured debt, over 60 months, in a chapter 13 repayment plan.
Thus, “passing” the “Means Test” to be eligible for chapter 7 bankruptcy, means that you have “failed” to prove that you can fund a 25% chapter 13 payment plan.
Your attorney will figure out:
a) what the correct number of your household members should be;
b) What your theoretical “Means Test Income” is (this may have no relationship to your actual past or future income);
c) what the allowable deductions will be from that theoretical “Means Test Income” (this may not have any relationship to your actual expenses);
d) what is counted as “unsecured” debt;
e) what the chapter 13 Trustee’s commissions will be;
f) what the legal fees will be for the chapter 13 case;
g) what other debts must be paid in that time period;
h) whether the theoretical means test “surplus” is small enough to allow you to qualify for chapter 7
i) whether your real-life budget will leave you with too much left over to qualify for chapter 7.
This is a highly complicated process. As they say on TV: “Do not try this at home”.