chapter 7 bankruptcy paperwork

When filing for Chapter 7 bankruptcy, a means test evaluates the debtor’s income and expenses. This test determines if a person can qualify for Chapter 7 or if they may have to file for Chapter 13. If you would like to learn more about the means test and Chapter 7 eligibility, here are a few points to consider. 

What Is the Means Test?

The means test is an essential aspect of Chapter 7 bankruptcy. 

The test was established in 2005 as part of the Bankruptcy Abuse Prevention and Consumer Protection Act to prevent system misuse and ensure that individuals can pay their debts.

The means test focuses on the debtor’s income, which determines whether they qualify for Chapter 7 bankruptcy. The calculation compares the debtor’s average monthly income to Ohio’s median income over the six months leading up to the bankruptcy filing. 

If the income is lower than the state’s median income, the individual passes the means test and is eligible for Chapter 7 bankruptcy. However, if that income exceeds the median income, the filer may need to think about other options. 

These levels change every six months. As of May 2023, these are the currency Ohio bankruptcy levels:

# of Household MembersAnnual Income

In cases where the debtor’s income is higher than the state’s median income, additional expenses and deductions are considered to determine whether they have enough disposable income to repay their debts. The test subtracts certain expenses from the debtor’s income to calculate their disposable income, such as: 

  • Housing
  • Utilities
  • Transportation
  • Healthcare
  • Childcare

These specific calculations can vary based on the standards set by the Internal Revenue Service (IRS) or other state-specific agencies. 

Chapter 13 May Be an Option

Failing the means test does not prevent a debtor from filing for bankruptcy, but Chapter 13 may be a better option. The means test is a complicated process that can have significant consequences. Seeking the help of an experienced bankruptcy attorney is recommended for accurate navigation and the best possible outcome. 

Failing the test may result in repaying a portion of debts in a repayment plan or converting the Chapter 7 case to Chapter 13. This type of bankruptcy involves a longer repayment period of three to five years, with monthly payments to a trustee who distributes funds to creditors.

Means Test Exemptions

However, there are some exceptions to the means test. For instance, certain disabled veterans who incurred their debts while on active duty and individuals with primarily business-related debts may be exempt from the means test requirements.

These exceptions highlight the importance of consulting with a knowledgeable bankruptcy attorney who can assess your circumstances and guide you through the process.

Why You Need the Assistance of an Attorney

You need an attorney who can accurately calculate the necessary figures, identify eligible deductions, consider special circumstances, and provide strategic advice. They’ll also provide professional representation and ensure compliance with Ohio’s specific laws, increasing your chances of a successful filing. With their guidance, you can have peace of mind and maximize your benefits under Ohio law.

Reach Out to Axelrod to Learn More About the Chapter 7 Means Test

The means test determines a debtor’s eligibility for Chapter 7 bankruptcy by assessing income, expenses, and disposable income. Failing the test can lead to filing for Chapter 13 or repaying debts through a plan. Consulting an attorney is important for navigating the means test and Chapter 7 bankruptcy. 

If you want to learn more about your eligibility for bankruptcy, contact the team at Axelrod Law Office in Lake County, OH. Call our office at (440) 271-8126 or submit a contact form to schedule a free, confidential legal consultation.