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Ohio Median Income Test: Are You Eligible for Chapter 7?

Ohio Median Income Test: Are You Eligible for Chapter 7?

The recently revised bankruptcy laws are the source of much confusion. Despite what you may have heard about recent changes, most people who need bankruptcy protection are still eligible. The Bankruptcy Means Test Calculator applies the formulas, regional income, and expense standards to help determine if you are eligible to file Chapter 7 bankruptcy.

The first step is to determine whether your income falls below the state’s median income. The bankruptcy law determines your income by looking at your household income during the six full calendar months before your bankruptcy filing. A person with a household size of four whose income is below $72,764, the median income for Ohio as of this writing is eligible to file Chapter 7.

If your income is slightly higher than the median income for Ohio, then the second step of the Bankruptcy Means Test, Calculation of Expense Deductions, is applied.

This section determines how much of your income is disposable and therefore could be used to pay your debts. Many deductions are allowed, including your monthly car loan and mortgage payments, in addition to standard deductions based on where you live and other factors. After your expenses are covered, the law will require you to file for Chapter 13 instead of Chapter 7 if you have disposable income based on the means test.

The test uses the Deductions under the Standards of the Internal Revenue Service (IRS) as a starting point but is expanded to cover other expenses. Under some circumstances, you may take deductions for payments on property that you plan to surrender to the creditor.

Although the means test calculator is consumer-friendly, it is important to note that the law was enacted to prevent abuse of the bankruptcy code. Even if you pass the means test, a judge can refuse a Chapter 7 discharge based on a totality of circumstances, which can include cases of excessive secured debts for luxury items. Consult with one of our experienced bankruptcy attorneys to help you navigate the new laws.

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