Does the cost of living in New York City drive people into Bankruptcy?

Unless you live in New York City it can be difficult to appreciate just how expensive it is to live here.  A recent article from The Huffington Post revealed 10 areas in the United States with the highest cost of living.  Manhattan was number one followed by Brooklyn and Queens County which was number 5 on the list.  Similarly, according to a 2012 Douglas Elliman report, the average sale price of a home in Manhattan was  $1.46 million compare with the national average of $230,000.  These numbers may sound outrageous because they are!

Many of my clients are making salaries far above the national average yet they still have very large amounts of debt.  Since the cost of living is so high in New York City, the risk in taking on a mortgage or starting a business can be prohibitive.  For example, if someone in Texas can purchase a home for $230,000 and a home in Manhattan, albeit a much smaller home, would cost $1,460,000, the risk for the NYC home is much greater.  When the housing market crashed, people with a $200,000 mortgage were not nearly in as much of a precarious position as the people with the $1,100,000 mortgage.

What does this mean for New Yorkers considering Bankruptcy?

Well let me first point out that it is typically easier for a person in NYC qualify to file for Bankruptcy than it is in other places.  The means test first looks at whether the person filing (debtor) is above the State’s median income.  If the debtor is above the median income, then certain maximum allowable local standards are taken into consideration.  For a single person living in Manhattan, $3,000 is used to calculate the mortgage/rental expense.  In Kings County the amount is $1,735.  For most of the country the amount is usually less than $1,000.  In fact, Manhattan’s has some of the highest allowable means test deductions in the United States!  That means that Manhattan is probably one of the easiest places to qualify for Chapter 7 Bankruptcy in the country.

If I move from Manhattan can I still use the same means test deductions?

The general rule is that you use the deductions for the place you lived for the greater part of the last 180 days before filing.  That means that if you lived in Manhattan for 91 days and then moved to another district for 89 days or less you would still use the New York County deductions for your bankruptcy filing.  This can make the difference for someone qualifying for a Chapter 7 Bankruptcy versus having a large amount of disposable income on the means test and only qualifying for a Chapter 13 Bankruptcy.


New York is one of the most amazing places to live in the United States.  However, if you live in New York City you are also living in one of the most expensive places in the world.  If you end up in over your head in debt you can get help.  Even if you make significantly more than people in other states who wouldn’t qualify, you probably can qualify if you live in New York City.

The first and hardest step is to come into my office for a free consultation.  Just pick up the phone and call my office at 212-244-2882 for a free consultation.