Bankruptcy is a scary word, indeed. When faced with overwhelming debt and considering bankruptcy, it is crucial to consult with an experienced and knowledgeable Piqua
, Ohio bankruptcy attorney who can explain everything associated with filing bankruptcy: from the types (Chapter 7 versus Chapter 13) to determining eligibility to what to expect from the process itself.
For most average consumers, Chapter 7 is the way to go because, if eligible, filers are able to have most, if not all, of their outstanding debt completely discharged. However, many wonder if they are even able to do so. The Chapter 7 bankruptcy means test ensures that the filer’s income is low enough to qualify him or her for this type of bankruptcy while also preventing those with higher incomes from taking advantage of the process.
Contrary to popular belief, one need not be completely destitute to qualify for Chapter 7. To determine eligibility, the Chapter 7 means test examines the filer’s income-to-debt ratio to ascertain whether he or she truly cannot afford to pay his or her debts.
Of particular importance is that Chapter 7 bankruptcy is only applicable to primarily consumer debts—not business ones.
Determining Income Eligibility
The first step is to determine one’s current monthly income and to weigh it against the median income for a similarly situated individual. If the filer’s income does not exceed the median, then he or she is automatically eligible for Chapter 7. However, those individuals whose income does, in fact, exceed the median amount, are not automatically disqualified from filing Chapter 7.
Disposable Income
If the filer’s income exceeds the aforementioned median, the next step is determining the amount of disposable income. Disposable income is the amount of money left over after paying all allowable monthly expenses, and this amount determines whether the filer can, in fact, repay some debts. Thus, if one’s disposable income exceeds the state’s allowable threshold then the only option is Chapter 13.
Online Means Calculators
To simplify the means test process, there are several free online calculators to help individuals determine their own Chapter 7 eligibility. One caveat, however, is these calculators are more of a snapshot of eligibility, and experts recommend a follow-up consultation with a knowledgeable bankruptcy attorney.
Should You File?
Simply because an individual qualifies for Chapter 7 under the means test does not necessarily mean that he or she should file. There are several factors to consider before making such a large and important decision, and consulting with an experienced bankruptcy attorney who can answer questions and address concerns is highly recommended.
For more information or to schedule a consultation to see if you qualify for bankruptcy, and which type, please contact us.