Unfortunately, there are many misconceptions about the bankruptcy process, including the belief that many hold that you can simply declare bankruptcy and receive relief. However, in reality, this is a complicated legal process that requires careful consideration and Columbus Chapter 7 bankruptcy lawyers to guide you through these matters. If you are interested in Chapter 7, you’ll need to understand what the means test is and how to pass. The following blog explores what you should know about these matters.
How Does Chapter 7 Bankruptcy Work?
If you are interested in filing for bankruptcy, it’s important to understand your options. Generally, one of the most common bankruptcy options is Chapter 7. This is a liquidation process that involves the seizure and sale of non-exempt assets to repay creditors, with the vast majority of dischargeable debts erased at the end of this process.
The primary purpose of this process is to ensure that individuals who have the means to do so repay their debts. This prevents others from taking advantage of the bankruptcy process by leaving this Chapter for those who need it.
However, it is important to understand that Chapter 7 does require filers to meet the eligibility guidelines to pursue this option. As such, those who do not pass the means test generally pursue Chapter 13 bankruptcy instead, which is a reorganization plan that lumps all debt into one expense, which is then paid in monthly installments over three to five years.
What Is the Means Test and How Do I Pass?
The means test is a process used for eligibility for Chapter 7 bankruptcy filers. Essentially, this process compares your household income to that of other households of the same size in Ohio. If you earn less than the average annual income for comparable-sized households, you can pursue this chapter. However, if you earn too much, you may be ineligible for this option. Generally, the test will then examine your disposable income by removing your allowed expenses, which include food, housing, utilities, and transportation. If your disposable income is below the median, you are eligible to pursue Chapter 7.
The means test will examine your income and assets to determine if you fall below the median income level. Generally, the test will examine your child support, unemployment benefits, tips, rental property income, retirement income, bonuses, and 1099 income. You should note that Social Security retirement income, Social Security disability income, and Supplemental Security income will not be taken into consideration, as these are considered exempt during bankruptcy.
Navigating bankruptcy can be incredibly difficult, as there are many important considerations you must make. Additionally, if you make an error during this process, you’ll find that it can impact the outcome of your case. As such, it is critical to connect with an experienced attorney with Cousino & Weinzimmer LLC to help you through these difficult matters. Our team is dedicated to helping our clients reap the full benefit of this process. Contact us today to learn more.
