How does the second half of the means test work?

If your median household income exceeds the median income for (New York) for your household size, then you haven’t passed the simple, straight-forward first half of the means test. So, it’s on to the second half.

The second and more complicated part of this test deducts certain expenses from your current monthly income. Some of those expenses are fixed amounts taken from the IRS collection financial standards. Some of the expenses are your actual expenses. It’s the actual expenses that may help you qualify for chapter 7, all other things being equal.

If you have unusually high payments on your mortgage(s), car loan(s) and other secured debt, and/or past-due payments on those secured loans, you have a better chance of passing the test.

The same is true if you have unpaid income taxes for a return that was due within 3 years or less, or unpaid maintenance or child support.

If you are employed by, e.g., agencies or departments of The City of New York, you experience higher payroll deductions as a percentage of your pay than do employees of non-governmental employers, and those mandatory high payroll deductions may also help you pass the second half of the means test.

Having more than one cars helps, and having an older car increases the associated deduction. If you commute to the City, the payments you make each month for tolls and parking also helps.

Unusually high medical expenses (that are proveable) is another special deduction. And there are a few others.

More next time.

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