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Demystifying the means test

You may be at the point where you struggle just to make ends meet each month. Creditors call you as often as they can in an attempt to get you to pay them. Your stress level is high, and you realize that bankruptcy could be the debt relief option you need.

Then you learn that you must first take something called the "means test" to determine whether you qualify to file. This may not be an algebra final, but considering the anxiety you may feel about this test, it might as well be. More than likely, you will pass this particular test. The only question is whether you qualify for Chapter 7 or Chapter 13.

What do you do first?

Every state, including Ohio, has a median income assigned to it based on the size of your family. If your income falls below that amount, you may qualify for Chapter 7 bankruptcy. Sources of income include the following:

  • Any income you receive through employment
  • Annuity payments
  • Gross business income
  • Gross income from your profession
  • Gross farm income
  • Retirement or pension income
  • Royalties, dividends and interest
  • Unemployment compensation
  • Real property and rental income
  • Regular spousal support or child support
  • State disability insurance
  • Workers' compensation payments

You do not have to include the following sources of income:

  • Social Security disability benefits
  • Supplemental Security income
  • Social Security retirement benefits
  • Tax refunds
  • Temporary assistance for needy families

Even if you initially qualify for Chapter 7, the trustee assigned to your case may determine that your circumstances warrant converting your Chapter 7 to a Chapter 13.

What if your income is higher than the median?

Just because your income is above the state median does not mean that you won't qualify to file for Chapter 7. The other portion of the test may still allow you to qualify. If your expenses leave you in the negative each month, you may still qualify for Chapter 7.

In addition, you may simply decide to file Chapter 7 despite the means test indicating that you should file for Chapter 13. If the trustee files a motion to convert your bankruptcy, you may defend your choice if special circumstances exist, such as a medical condition, unemployment or unusually high rent. The court will then determine whether you may proceed with your original filing.

What if you still have questions?

The bankruptcy process can be complex and frustrating for many people. If you still have questions, you may benefit from talking to a bankruptcy attorney. In fact, you may find that attempting to go it alone causes more headache than you would like. Documentation and deadline requirements can be confusing, and if you fail to provide or correctly complete the appropriate paperwork, or you miss a court deadline, the court may dismiss your bankruptcy. Enlisting the appropriate guidance could help you receive the fresh start you need and deserve.

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