One of the reasons a chapter 7 bankruptcy is one of the most sought after forms of bankruptcy is that it offers the quickest route to debt relief. Debts can often be resolved in a matter of months, giving you a fresh start. In order to your debts discharged through chapter 7, you must pass through the “means test” to determine whether or not you qualify.
Understanding the Means Test
The means test for a chapter 7 bankruptcy is a tool used to establish those debtors who truly can’t repay their debts from those who can through a series of payments in a chapter 13 bankruptcy. The means test works by subtracting your monthly living expenses from your monthly income, averaged over a six month period. This gives a value to what is called your “disposable income.” Your disposable income is considered to be the money you have left after basic spending needs, such as your mortgage, gas and groceries. The higher computed value of your disposable income, the lower the chances of your Chapter 7 filing being approved.
There are two major considerations when it comes to your income:
1) Is it more than the median? Your monthly income and disposable income will be compared against a median income level for the state of Ohio. If your income values are below the median level, the chances of being approved for a chapter 7 bankruptcy are higher. However, if your income level is above the median income level your income value is likely not going to pass the means test. If chapter 7 isn’t an option for you, your bankruptcy attorney in Cincinnati can help you file for chapter 13 instead.
2) Do you have enough disposable income to repay some debts? If your income value was higher than the median income of Ohio and you are found not found eligible for a chapter 7 bankruptcy, you still have the option to reorganize your debts in a chapter 13 bankruptcy. However, even a chapter 13 bankruptcy isn’t the best solution for everyone. Your bankruptcy attorney in Cincinnati will help you evaluate all of your options for finding relief from your debts