Before you can file for Chapter 7 bankruptcy, you must pass a means test. The primary purpose of this test is to prevent individuals from abusing the system. If you can afford to pay off your debts, discharging them through bankruptcy is unfair to your creditors. As long as you have little to no disposable income, though, passing the means test should be relatively straightforward.

Stage One

To complete the first part of the means test, you must compare your current monthly income (CMI) against the state's median income for a household of the same size. To determine your CMI, total your earnings from the past six months, and then divide the amount by six to arrive at an average figure.

As of May 1, 2020, petitioners who live alone will pass the means test if they earn less than $4,198 per month. If, on the other hand, you have a household of five, you must earn less than $8,381 per month to pass the test. If you make more than the state’s median income, you may still qualify for Chapter 7, but you’ll have to proceed to stage two.

Stage Two 

The bankruptcy court recognizes that just because you earn more, it doesn't mean you have more disposable income. To determine if you qualify for Chapter 7 despite making more than the median income, you must total all allowable expenses. Examples include essentials like housing, clothing, groceries, and medical care. A seasoned attorney will ensure you don't overlook any applicable obligations.

Once you know how much you spend on allowable expenses, subtract the total from your earnings to determine your disposable income. If the judge deems this figure low enough, you can declare Chapter 7. And if it's too high, you may still be eligible for Chapter 13.

To determine whether you’re eligible for Chapter 7 bankruptcy, contact Harry B. Zornow in Hamilton, OH. For more than 30 years, this compassionate attorney has been helping clients achieve much-needed debt relief. When you turn to him for guidance, he won’t judge your situation. Instead, you’ll receive attentive and personalized advice at every stage of the proceedings. To request a consultation, call (513) 737-9770. Visit his website for more information about his services.