The decision as to whether an individual could file for a nearly complete discharge of debts by filing for Chapter 7 bankruptcy up until 2005 was a decision made by a bankruptcy judge. At that time, if he or she decided that a debtor wouldn’t be able to repay his or her debts, then he or she would allow the debtor to proceed in filing Chapter 7 bankruptcy as opposed to Chapter 13.
Much has changed since then, though. There’s a much more streamlined approach to determining whether an individual can file for Chapter 7 or 13 bankruptcy. If a person doesn’t qualify to file for the former, then they may easily convert it over to the latter.
Whether someone can file for Chapter 7 bankruptcy is contingent upon how much money that individual made in income during the six months prior to filing for it. This includes any money an applicant’s farm or business made, any wages or bonuses they brought in, monthly retirement, alimony or child support. Also how much rent income, unemployment or disability benefits, royalties and interest they brought in matters, too.
The only types of monthly earnings that are excluded from being counted as income are retirement pay paid by the Social Security Administration (SSA) and tax refunds.
Once a tally of all income is made, then that amount is then compared to Ohio’s median income. If, after comparing the two, it appears that the amount you bring in is on par with or less than the median set for the state, then you’ll likely be eligible to file for Chapter 7 bankruptcy. If it exceeds it, then a means test will be performed.
The means test involves you listing your “allowable” expenses including food, housing and others to see how much income it appears you end up with after paying for all of these. If there’s a set amount of excess money left over, then a bankruptcy trustee may dismiss your Chapter 7 case and instead suggest that you work out a repayment plan with your creditors by filing Chapter 13 instead.
Making sense of complex bankruptcy laws is not easy. Violating them can end up with you behind bars. If you’re overwhelmed by debt, then you may benefit from sitting down with a trusted Cincinnati Chapter 7 bankruptcy attorney who can discuss debt relief options available to you.