Judges used to decide whether debtors qualified for debt relief by filing for Chapter 7 bankruptcy. The court system implemented the means testing system in 2005. Now, all debtors wishing to file for Chapter 7 bankruptcy must first pass a means test to qualify for a complete discharge of their debts versus Chapter 13, which involves repayment. You may find it beneficial to learn more about what the means test considers so that you can better decide what type of bankruptcy you’re eligible to file.
Income that you’ll need to tally as part of the means test
The means test begins with an accounting of your income from various sources for the past six months before your filing. You must include any bonuses, rental income, child or spousal support, money your business or farm generated and disability, unemployment or retirement benefits as part of this calculation.
There is some income or revenue that the bankruptcy court does not consider, including tax refunds and Social Security Administration (SSA) stipends.
Determining how your income compares to Ohio’s median income
The next step to take after tallying up all your income is to compare it with Ohio’s median income. You can generally file for Chapter 7 bankruptcy if you earn the same or less than the state’s median income. You will need to take a means test if your income exceeds Ohio’s median amount.
How the means test works
One of the first steps you’ll need to take as part of the means test is to list your “allowable” expenses. These may include basic necessities such as housing and food. You’ll then need to subtract these from your income to ascertain how much remains after these expenditures. A bankruptcy trustee may dismiss any Chapter 7 case you already filed and urge you to file for Chapter 13 if your disposable income exceeds a particular amount based on your household size.
Why you should avoid self-filing your bankruptcy
Bankruptcy codes are quite complex to understand, and there are pros and cons associated with pursuing Chapter 7 versus Chapter 13 options. The choices you make in your Middleton case could expose you to further legal liability. Don’t jeopardize your future. Let a bankruptcy attorney make sure you do everything right in your Ohio case.