Chapter 7 bankruptcy can be a suitable option for Ohio residents who are in need of debt relief. However, before you file for Chapter 7, you need to understand the Chapter 7 eligibility criteria and what the bankruptcy means test is.
Are you wondering what the means test for Chapter 7 bankruptcy is and how it applies to your situation? If so, check out this article, where we will be discussing what the means test in bankruptcy means and the median income limits in Ohio.
What is the Bankruptcy Means Test?
Before you can file for Chapter 7 bankruptcy in Ohio, you have to pass the means test in order to qualify. The means test helps to filter higher-income filers from lower-income filers by using a median income chart. If your income is over the median income limit for a household of your size, you’ll have to use the means test to calculate your income and expenses.
If you exceed the Ohio median income, you can proceed to complete the full means test to determine if you still qualify for Chapter 7 bankruptcy. This will include subtracting reasonably necessary monthly expenses from your income to see how much disposable income you have left over. Reasonable and necessary expenses that are allowed include things such as:
- Food
- Utilities
- Mortgage or rent
- Out-of-pocket healthcare expenses
- Court ordered payments
- Child care
- Life insurance
- Transportation
- Involuntary paycheck deductions
- Charitable contributions
- Income taxes
- Health and disability insurance premiums
Some of these expenses can be included as the actual amount that you have to pay monthly, such as childcare or transportation expenses. However, there are other expenses that you will only be able to deduct from a standard allowance set by the Internal Revenue Service, such as healthcare costs or life insurance expenses. In many cases, you may still qualify for Chapter 7 if the means test demonstrates that you don’t have as much disposable income as you need.
What is the Median Income to File Chapter 7?
Now that you know what the bankruptcy means test is and how it applies to Chapter 7 bankruptcy, you need to know what the median income limit is in Ohio. Something to keep in mind is that the median income limitations change frequently, which may impact your eligibility. For bankruptcy cases that were filed on or after April 1, 2024, the median income limits are:
- Single household: $61,617
- Two-person household: $77,816
- Three-person household: $94,913
- Four-person household: $113,435
- Five-person household: $123,335
- Six-person household: $133,235
- Seven-person household: $143,135
- Eight-person household: $153,035
- Nine-person household: $162,935
Calculating your household size can be a bit tricky, depending on your situation, as there are no specific requirements for determining how big your household is. In general, anyone in your home can be added to your household size, whether they are relatives, your children, or a roommate. It is usually best to include everyone who is living in your home, whether they are an immediate relative or not.
The Chapter 7 bankruptcy means test will include your entire household income even if your spouse is not filing with you. Any kind of income will also be counted as your household income, whether it comes from your main form of employment or side jobs. If your income is variable, you will need to use an average income calculator to come up with an estimate of your average monthly income.
Before you proceed with taking the bankruptcy means test to determine your eligibility for Chapter 7, you need to consider hiring a bankruptcy attorney in Ohio. An attorney will have extensive experience with Ohio bankruptcy laws and requirements and can help ensure you do the means test correctly.
Ohio Means Test Exemptions
There are some exemptions that can help you be exempt from the means test even if you are over the Ohio median income limit for your household size. These exemptions include:
- You’re a disabled veteran, and your debt was incurred primarily during active duty or while you were performing a homeland defense activity.
- Your debt is not primarily consumer debt.
What Happens If You Fail the Chapter 7 Means Test?
Depending on your total income and the size of your household, you may be disqualified from filing for Chapter 7 bankruptcy. If that is the case, there are some other options that you can pursue for debt relief. One of the best options if you don’t qualify for Chapter 7 is to apply for Chapter 13 bankruptcy instead.
Chapter 13 bankruptcy, also called the wage earners plan, is designed for individuals of a higher income. This option allows you to keep the majority of your assets and does not have many of the eligibility restrictions that Chapter 7 has. When you use Chapter 13 bankruptcy, this will only be on your credit report for seven years, and it usually takes between 36 and 60 months to complete your plan.
Some other options you may consider as well include debt management and debt settlement companies, as they can help you lower the amount of debt you owe or lower the interest rate for your debt. However, you need to be extremely cautious when using either of these options, as you need to choose a high-quality company that will not add to your current debt. Alternatively, you could seek the help of a financial counselor to determine if it is possible to create a budget that allows you to pay off your debt.
Before you proceed with any of these options, you need to get the assistance of a bankruptcy attorney. Not only can they help you locate the best option for your situation, they can ensure that you get the best possible outcome that aligns with your financial goals.
Contact a Bankruptcy Attorney in Ohio
Do you want to file for Chapter 7 bankruptcy in the state of Ohio? Richard P. Arthur, Attorney at Law, can help you navigate the process of passing the means test for Chapter 7 bankruptcy. Richard P. Arthur has handled many bankruptcy cases in Ohio and can help you every step of the way. Contact us today at 937-254-3738 for a consultation.