This article is for informational purposes only and does not constitute legal advice. If you need legal guidance specific to your situation, or information on the New York bankruptcy means test, consider consulting with a qualified bankruptcy attorney.
New York Financial Reality: When the City That Never Sleeps Keeps You Up at Night
New York’s relentless financial demands can overwhelm even the most resilient residents. From Manhattan’s astronomical rent prices averaging over $5,000 per month to the daily expenses that add up faster than subway delays, New Yorkers deal with financial pressures that would crush residents of most other states.
Whether you’re dealing with co-op maintenance fees that rival mortgage payments, healthcare costs that drain savings accounts, or the simple reality that a $150,000 household income barely covers basic living expenses in many NYC neighborhoods, the Empire State’s financial landscape is unforgiving.
Rent in NYC is 38.5% higher than in Los Angeles. Add in student loans, credit card debt from surviving between paychecks, and the crushing weight of trying to maintain New York’s expected lifestyle, and financial distress becomes an unfortunate reality for many residents, no matter how hard they work.
When debt collectors start calling and monthly minimums exceed your take-home pay, Chapter 7 bankruptcy might be the lifeline you need. But first, you’ll need to navigate New York’s bankruptcy means test requirements to determine if this powerful debt relief option is available to you. If it is, is it truly the best option for you?
What Is the New York Bankruptcy Means Test?
The New York bankruptcy means test is the federal government’s way of determining who truly needs bankruptcy protection versus who should be paying back their debts. According to the United States Trustee Program, this standardized financial assessment evaluates your income against established benchmarks to determine Chapter 7 eligibility.
How does the means test work in practice?
Part 1: Income Comparison – Your household’s average monthly income gets measured against New York’s median income levels for your household size. Fall below the median? You’re automatically qualified and only need to complete Form 122A-1.
Part 2: Expense Analysis – Exceed the median income? Don’t panic yet. You can still qualify by proving that allowable expenses leave you with minimal disposable income after paying necessary bills. This requires completing Form 122A-2.
The calculation uses your average monthly income from the six full months before filing. If you’re filing in September 2025, you’d include income from March through August 2025—no cherry-picking your lowest-earning months.
New York Chapter 7 Income Limits for 2025
The following income thresholds apply to bankruptcy cases filed after April 1, 2025, and will remain effective until it’s updated around November 2025. Figures are updated every six months based on U.S. Census Bureau data:
| Household Size | Annual Income Limit |
| 1 person | $68,795 |
| 2 people | $89,052 |
| 3 people | $108,589 |
| 4 people | $134,443 |
For households larger than four people, add $11,100 for each additional family member.
Important Note for NYC Residents: These income limits apply statewide, but remember that $131,781 for a family of four probably goes much further in Buffalo or Albany than it does in Manhattan or Brooklyn. The New York bankruptcy means test doesn’t adjust for dramatic regional cost differences.
Understanding “Income” for the New York Bankruptcy Means Test
Income That Counts
The New York bankruptcy means test includes “any amount paid by any entity other than the debtor, regularly for household expenses.” This comprehensive definition covers:
- Salary and wage income (including that Wall Street bonus)
- Spousal income (unless legally separated)
- Overtime and bonus payments
- 1099 contractor income (Uber, Lyft, freelance work, gig economy earnings)
- Net rental property income (if you’re lucky enough to own rental property in NY)
- Government benefits and assistance
- Child support and alimony received
- Investment income (dividends, interest, royalties)
- Pension and retirement distributions
- Net business income
- Unemployment compensation
- Workers’ compensation benefits
Income That Doesn’t Count
Certain income types are excluded from means test calculations:
- Most Social Security Disability (SSDI) payments
- Supplemental Security Income (SSI)
- Payments to victims of war crimes
- Disaster relief payments (including COVID-19-related assistance)
- Certain veterans’ benefits
Determining Your New York Household Size
Household size significantly impacts your means test calculation. Your household typically includes:
- You and your spouse (unless legally separated)
- Dependent children claimed on tax returns
- Other dependents you financially support
NYC-Specific Considerations: Multi-generational living arrangements are common in New York due to housing costs. Adult children living at home, elderly parents you support, or other family members you help financially may affect your household size calculation, depending on how the bankruptcy court interprets your specific situation.
The Above-Median Income Analysis
Earning above New York’s median income doesn’t automatically disqualify you from Chapter 7 bankruptcy—which is fortunate, considering how expensive it is to live here. The second phase of the means test allows you to subtract allowable monthly expenses from your current monthly income.
This calculation determines your “disposable income”—money theoretically available for debt repayment after covering necessary expenses. If your disposable income falls below specific thresholds, you can still qualify for Chapter 7 bankruptcy.
Allowable Expense Deductions
Actual Expense Deductions (based on your real costs):
- Mandatory employment deductions (union dues, retirement contributions, MetroCard deductions)
- Health and disability insurance premiums
- Federal, state, and local taxes (including NYC taxes)
- Court-ordered child support and alimony payments
- Childcare expenses necessary for employment
- Term life insurance premiums
- Secured debt payments (mortgage, car loans)
- Charitable contributions (limited to specific percentages)
Standardized Expense Allowances (based on national and regional standards):
- Food and housekeeping supplies
- Clothing and personal care
- Housing and utilities
- Transportation costs
- Out-of-pocket healthcare expenses
The IRS sets these standardized allowances, which vary based on household size and geographic location. New York typically receives higher allowances than most states, reflecting the higher cost of living.
Using Our Chapter 7 Calculator
Our calculator mirrors the official bankruptcy forms used by courts and trustees. It will help you estimate:
- Whether your income falls below New York’s current median income thresholds
- If above-median, whether allowable expenses may still qualify you for Chapter 7
- Estimated attorney fees for filing bankruptcy in New York
What Happens When Chapter 7 Bankruptcy Is Successfully Filed
Completing Chapter 7 bankruptcy provides debt relief to a reasonable degree, but understanding the process helps you make informed decisions.
The Automatic Stay and Discharge Process
Once your Chapter 7 petition is filed, an “automatic stay” immediately stops most collection activities, including:
- Creditor phone calls and letters
- Wage garnishments
- Bank account levies
- Foreclosure proceedings (temporarily)
- Repossession attempts
Most Chapter 7 cases are complete within 4-6 months. It usually ends in a discharge that permanently eliminates qualifying debts. However, not all debts can be discharged, including recent taxes, student loans (in most cases), child support, and recent luxury purchases.
Understanding Exempt vs. Non-Exempt Assets in New York
New Yorkers get to choose between state exemptions and federal exemptions to protect certain assets. Generally speaking (i.e. considering both state and national exemptions), this is a non-exhaustive list of exempt and non-exempt assets:
Exempt Assets (typically protected):
- Primary residence equity up to an amount specified by law
- Vehicle equity up to an amount specified by law
- Personal property, including household goods, clothing, jewelry, and books
- Retirement accounts like 401(k)s and IRAs
- Tools of trade necessary for employment up to a specified amount
- Cash value life insurance up to a specified amount
Non-Exempt Assets (may be liquidated):
- Luxury items with significant value beyond exemption limits (Rolex watches, designer jewelry, high-end electronics)
- Second homes or investment properties (vacation home in the Hamptons, rental property in Brooklyn)
- Excess vehicle equity beyond exemption limits (luxury cars, boat, motorcycle)
- Cash and bank accounts beyond protected amounts (savings accounts with substantial balances, CDs, money market accounts)
- Valuable collections or artwork (rare wine collections, original paintings, vintage comic books, sports memorabilia)
- Non-exempt business assets (restaurant equipment, professional office furniture, inventory)
Long-Term Impact and Recovery
Chapter 7 bankruptcy remains on your credit report for 10 years—that’s a full decade of possibly explaining to landlords, lenders, and sometimes employers why you filed. It is illegal for employers to discriminate against you solely because of a bankruptcy filing. However, some prospective employers may consider bankruptcy when making hiring decisions, especially for financial positions. For further reading, visit here.
That explains why many who have successfully filed describe their experience as bittersweet: immediate debt relief? Absolutely. But the long-term credit impact is real and lasting.
While some people begin rebuilding credit within 1-2 years, the bankruptcy notation follows you through major life events—buying a home or even financing a car purchase. The immediate relief from overwhelming debt often outweighs the temporary credit impact, but “temporary” in bankruptcy terms means years, not months.
When You Don’t Qualify for Chapter 7: Alternative Solutions
Failing the means test doesn’t eliminate your options for financial relief. Several alternatives may provide the debt relief you need.
Chapter 13 Bankruptcy
Chapter 13 bankruptcy, the “wage earner’s plan,” allows you to reorganize debts into a manageable 3-5 year repayment plan. Benefits include:
- No income limits for qualification (only debt limits apply)
- Ability to keep assets that exceed exemption limits
- Shorter credit report impact (7 years vs. 10 years for Chapter 7)
- Potential to catch up on missed mortgage or maintenance payments
Professional Debt Settlement
Debt settlement cuts straight to the point: negotiate your balances down to what you can actually afford to pay. Rather than liquidating assets or enduring a decade-long credit report scar, you work with professionals who speak creditors’ language and understand what they’ll realistically accept.
Here’s what legitimate debt settlement delivers:
- Direct creditor negotiations that you don’t have to handle
- Substantial debt reductions on original balances
- Payment plans that fit your actual budget, not theoretical calculations
- Credit impact that’s often less severe and shorter-lived than bankruptcy
The key is finding a company that’s been doing this successfully for years—one with A+ BBB ratings, industry certifications (BSI), and membership in professional associations (AADR). Look for firms that can show you real settlement letters from actual cases, not just marketing promises. The best companies are licensed in multiple states and staff counselors who understand that New York debt problems require New York-level solutions.
CuraDebt has all of the above. See our settlement letters — conclusive proof that we know precisely what to do, no matter your situation.
Debt Management Plans
Credit counseling agencies offer debt management plans that focus on reducing interest rates rather than principal balances. These programs:
- Negotiate lower interest rates with creditors (often reducing rates from 20%+ to single digits)
- Consolidate payments into one monthly amount
- Typically lasts 3-5 years
- Works best for individuals with steady income and primarily credit card debt
However, debt management plans have significant limitations that make them unsuitable for many people facing serious financial hardship. You’re still required to pay back 100% of your original debt principal, which means if you owe $50,000, you’ll still pay the full $50,000 even with lower interest rates. Additionally, these programs often require you to close all credit accounts, leaving you without any financial safety net during the lengthy repayment period.
Making the Right Choice for Your Financial Future
Determining whether Chapter 7 bankruptcy is right for your situation requires careful analysis of your complete financial picture. The means test provides the starting point, but other factors matter:
- Your asset ownership and applicable exemptions
- The types of debts you carry
- Your long-term financial goals
- Your ability to maintain steady income in New York’s crazy, competitive market
While bankruptcy can provide powerful debt relief, it’s not the only solution. Debt settlement may offer similar relief with potentially less impact on your credit and financial future, particularly if you have significant unsecured debt but income that exceeds bankruptcy thresholds.
Next Steps: Get Support From The Pros
Financial distress requires informed decision-making with potentially life-changing consequences. Whether you’re considering Chapter 7 bankruptcy, exploring debt settlement options, or evaluating other alternatives, professional guidance can help you understand your options and choose the path that best serves your long-term financial health.
No need to jump through hoops to consult with an expert. Simply give us a call through and we’ll have the best person on the job breaking your options down, pronto.
For debt settlement specifically, look for companies with extensive experience. CuraDebt has been helping clients for over two decades and maintains specialized teams with deep expertise in areas like tax resolution.
Our counselors come from diverse professional backgrounds and are able to better address the varied financial challenges New Yorkers face, from Wall Street professionals dealing with bonus-related tax issues to small business owners navigating complex debt situations.
Remember: This guide provides general information about New York bankruptcy means testing. Individual circumstances vary significantly, and professional consultation is recommended before making any major financial decisions.
