The 2005 BAPCPA introduced the Means Test (11 U.S.C. § 707(b)) to prevent abuse of Chapter 7. Above a certain income, filers must instead file Chapter 13.
Two-Step Means Test
Step 1 — Household Income vs State Median
Average household income for the six months before filing is annualized and compared to the median income for the filer’s state and household size. Below median = pass. Above median = proceed to step 2.
Step 2 — Disposable Income Calculation
Subtract IRS National/Local Standards, actual debt service, and taxes from income. If the result is below threshold, Chapter 7 is still available.
NJ and NY Median Income (2026 estimate)
Updated every six months. Approximate figures:
New Jersey: 1-person ~$70K, 2-person ~$90K, 4-person ~$130K
New York: 1-person ~$68K, 2-person ~$87K, 4-person ~$125K
Both states are calibrated from U.S. Census Bureau data.
Deductions Korean Clients Often Miss
(1) Medical expenses for chronic conditions, prescriptions, and routine care. (2) Private school or tutoring within reasonable limits. (3) Support payments to parents — including remittances to Korea (with documentation, partially deductible). (4) Religious giving — regular tithes are protected within reason under 11 U.S.C. § 707(b)(1).
Strategy
If the Means Test is close, Song Law Firm evaluates: Filing timing — postpone filing if a one-time bonus inflated the six-month average. Household size review — include dependent elderly parents or adult unmarried children if applicable. Chapter 13 conversion — if Chapter 7 fails, propose a 3–5 year plan.
FAQ
Q. Does a severance package received six months ago count?
Generally yes, but 11 U.S.C. § 101(10A) focuses on “regularly received income.” Some courts in SDNY and DNJ have excluded one-time severance. Song Law Firm reviews recent decisions for each client.
Our Commitment
Song Law Firm helps Korean American clients across NJ and NY navigate every step — pre-filing creditor negotiations, asset protection strategy, and post-discharge credit recovery — in Korean, English, and Chinese. Our team serves Fort Lee, Bergen County, Hudson County, and the broader NJ–NY metro area.
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This column is for general informational purposes only and is not legal advice on any specific matter. Reading this article or contacting Song Law Firm does not create an attorney–client relationship. Please consult a qualified attorney for advice on your particular situation.
