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Chapter 7 Means Test: The Business Debt Exception

Chapter 7 Means Test: The Business Debt Exception

When you are exploring the possibility of filing Chapter 7 bankruptcy, you will need to undergo a means test to determine if your income qualifies you for the process. This test looks at whether you have the disposable income to pay back your creditors. If you don’t, because your current monthly household income is less than the Ohio median income for a household of your size, you should be eligible to file a Chapter 7 bankruptcy.

There is an exception, however, when it comes to business debt. If your business debt is more than half of your total debt, you will not have to go through the means test at all. This can provide a great deal of relief for individuals who otherwise would not be able to turn to Chapter 7 for help with their financial difficulties.

What is business debt?

Business debt is any debt you assumed in an effort to start or grow a company and eventually turn a profit. This may include credit cards you used to cover business expenses, car loans, business taxes and money you owe to vendors. In some cases, personal taxes may even count as business debt.

In general, if you can prove that most of your debts are business-related, you can forego the means test and move forward with filing Chapter 7. However, if that’s not the case, you still may qualify for Chapter 13 bankruptcy, which comes with different requirements. A bankruptcy attorney can advise you on your best options.

For further guidance on the bankruptcy process in Ohio, speak with a knowledgeable Chapter 7 attorney in Dayton at Fox & Associates Co., LPA.

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