Chapter 7 Bankruptcy Income Limits: What You Need To Know In New York

If you are thinking about filing Chapter 7 bankruptcy, one of the first questions you are likely asking is:

“Do I make too much money to qualify?”

Chapter 7 income limits are real, but they are often misunderstood. Many people assume they are automatically disqualified because they have a job, earn overtime, own a house or make more than they did in the past. In reality, the rules are more flexible and more detailed than most people expect and depend on the facts and circumstances of each individual.

This guide explains how Chapter 7 bankruptcy income limits work, what the means test actually considers, and how people with steady income can still qualify in New York.

This article is for general information only and is not legal advice. Always speak with a New York bankruptcy attorney about your specific financial situation.

Is There A Set Income Limit For Chapter 7?

There is no single hard cutoff that automatically disqualifies you from Chapter 7.

Instead, eligibility is based on a two-step analysis, commonly called the means test, which looks at:

1. Your household income, 

2. Number of individuals in your household, and

3. Your allowed expenses under bankruptcy rules

Many people who initially think they earn too much still qualify once the full analysis is done.

Step One: Comparing Your Income To The New York Median

The first part of the means test compares your average monthly income to the median income for a household of your size in New York.

What Counts As Income?

For Chapter 7 purposes, income usually includes:

• Wages and salary

• Overtime and bonuses

• Self-employment income

• Rental income

• Pension or retirement income

• Regular contributions from family members

Income is generally calculated using an average of the six full months before you file, not just your most recent paycheck.

This means:

• A recent raise may not disqualify you

• A recent job loss or reduction in hours may help you qualify

• One-time spikes in income may be averaged out

What Is The Median Income Test?

If your household income is below the New York median for your household size, you usually pass the first step of the means test and can move forward with Chapter 7, assuming no other issues exist.

If your income is above the median, you are not automatically disqualified. You move to step two.

Because median income figures change periodically, an attorney will use the most current numbers available at the time of filing.

Step Two: The Full Means Test Calculation

If your income is above the New York median, the means test looks more closely at your finances.

This step allows you to deduct certain approved expenses, including:

• Health insurance and medical expenses (which exceed the IRS standards and local limits)

• Taxes and mandatory payroll deductions

• Child care and support obligations

• Secured debt payments, such as a mortgage or car loan

• Special circumstances

After subtracting these allowed expenses from your income, the test looks at whether you have enough disposable income left to repay creditors.

If your remaining disposable income is low enough, you may still qualify for Chapter 7 even though your income is technically above the median.

Common Situations Where People Still Qualify Despite Higher Income

Many people assume that earning “too much” means Chapter 7 is off the table. That is often not true.

You may still qualify if you:

• Live in a high-cost area with significant housing expenses

• Support children or other dependents

• Pay high medical or insurance costs

• Have large secured debt payments, such as a car loan

• Are self-employed with fluctuating income

• Recently experienced a drop in income

The means test is not just about what you earn. It is about what you realistically have left after necessary expenses.

What If You Do Not Pass The Chapter 7 Means Test?

If the means test shows that you have enough disposable income to repay creditors, Chapter 7 may not be the right fit. But that does not mean you are out of options.

Chapter 13 As An Alternative

Many people who do not qualify for Chapter 7 turn to Chapter 13 bankruptcy, which:

• Uses a 3 to 5 year repayment plan

• Allows you to catch up on mortgage or car arrears

• Can reduce or restructure certain debts

• Let's you keep property that might be at risk in Chapter 7

Chapter 13 does not have the same income limits as Chapter 7, but it does require regular income to support a payment plan.

Income Limits And Household Size: Why Details Matter

Household size plays a major role in Chapter 7 eligibility.

For example:

• A single filer with no dependents is compared to a lower median income threshold

• A family of four is compared to a much higher median income threshold

Household size is not always obvious. It can include:

• Spouses, even if filing alone in some cases

• Children or other dependents, such as parents

• Other people you financially support in your home

Miscounting household size can change the outcome of the means test, which is why professional guidance matters.

Does Filing Jointly Change The Income Limits?

If you are married, both spouses income and expenses are considered in determining whether you are eligible under the means test to file a chapter 7 bankruptcy even if one spouse is not filing.

• Joint filing combines both spouses’ income and expenses

• Individual filing combines both spouses’ income and expenses 

There are strategies for married couples dealing with debt, but they must be handled carefully to comply with bankruptcy rules and avoid delays or denials.

Common Myths About Chapter 7 Income Limits

“I have a job, so I cannot file Chapter 7.”

Not true. Many Chapter 7 filers are employed. The question is whether your income, after allowed expenses, leaves enough to repay creditors.

“Overtime automatically disqualifies me.”

Overtime is included in income calculations, but it is averaged over time. Overtime does not automatically disqualify you. In the end, it depends on your total household income and expenses.

“If I make more than the median, Chapter 7 is impossible.”

False. Many people with above-median income qualify after completing the full means test.

“I should quit my job to qualify.”

This is a bad idea and can create serious legal problems. Eligibility should be evaluated based on your real financial circumstances, not artificial changes.

Why It Is Important To Talk To A Bankruptcy Attorney

The Chapter 7 means test is one of the most technical parts of bankruptcy law. Small mistakes can lead to:

• A dismissed case

• Delays in your discharge

• Denial of a discharge of your debts

• Allegations of abuse

• Loss of time and filing fees

A New York bankruptcy attorney can:

• Calculate your income correctly

• Apply the right expense standards

• Identify timing strategies that may help you qualify

• Advise whether Chapter 7 or Chapter 13 makes more sense

Trying to guess whether you qualify based on income alone often leads people to give up on relief they may actually be entitled to.

FAQs

What are the income limits for Chapter 7 in New York?

There is no single limit. Your income is compared to the New York median for your household size. If you are above the median, you must complete the full means test to see if you still qualify.

How far back does the court look at income?

The court generally looks at your average income over the six months before filing.

Can I qualify if my income recently dropped?

Yes. If your income has decreased, timing your filing correctly may help you qualify. An attorney can explain how this works.

Do unemployment benefits count as income?

Yes. However, some forms of income may be treated differently. How specific benefits are counted depends on current law and your situation.

What happens if I fail the means test?

Failing the means test does not mean you are out of options. Chapter 13 or other debt relief strategies may still help.

Talk To A Long Island Bankruptcy Attorney About Chapter 7 Eligibility

Income limits should not stop you from exploring your options. Many people who assume they do not qualify for Chapter 7 are surprised once their full financial picture is reviewed.

If you live in Nassau County, Suffolk County, or the greater New York area and are wondering:

• Whether you qualify for Chapter 7

• How your income is calculated

• Whether Chapter 13 might be a better fit

Kamini Fox, PLLC, can help you understand your options and choose the right path forward.

Call 516-493-9920 or contact us through the Kamini Fox, PLLC website to schedule a confidential consultation and get clear answers about Chapter 7 bankruptcy income limits.

This article is for informational purposes only and does not constitute legal advice. To receive advice specific to your circumstances, consult directly with an attorney licensed in your jurisdiction.