The means test is a crucial factor in determining whether you qualify for Chapter 7 or Chapter 13 bankruptcy. It’s an essential part of the bankruptcy filing process – every case requires a means test and it’s completed as part of your application. As an experienced bankruptcy attorney in Ohio, let me explain how this important calculation works.
The Role of Experience
When you’re right on the bubble between Chapter 7 and Chapter 13, experience matters. Some attorneys might automatically push for Chapter 13 in borderline cases, but creative solutions often exist to qualify for Chapter 7. The means test can be tricky, and having experienced guidance can significantly affect your outcome.
Related Blog: Understand the difference between Chapter 7 vs. 13 Bankruptcy
Understanding the Basics
The means test is based on financial information, taking your income and analyzing how it’s being spent. The test involves plugging numbers into government calculations that examine:
- Housing allowances
- Food expenses
- Clothing costs
- Medical and dental expenses
- Other line item living expenses
The Two-Part Test
There are two key components to understand:
- Median Income Threshold: For example, in Ohio, if you’re a household of two, the income guideline might be around $72,006. Being below this median income level typically makes Chapter 7 more straightforward.
- Extended Means Test: If you’re above the median income, don’t worry – you may still qualify for Chapter 7. This requires what’s called an “extended means test,” where additional factors are considered that could still qualify you for Chapter 7 despite higher income.
Learn more about our Chapter 7 Bankruptcy Experience
Learn more about our Chapter 13 Bankruptcy Experience
Important Facts About the Means Test
- The means test is identical in every state – they’re federal forms
- Only the median income numbers vary by state
- Every bankruptcy case requires a means test
- The test generates a “happy face” if you pass, and a “sad face” if you fail
Special Circumstances: Non-Filing Spouse
An important consideration involves cases with a non-filing spouse. While the test looks at combined household income, there’s a creative solution called the “marital deduction.” Here’s how it works:
The non-filing spouse’s monthly expenses go onto the filing client’s budget. For example, if the non-filing spouse has:
- $2,000 in credit card payments
- $1,000 in student loan payments
These expenses ($3,000 total) can be credited to the filing spouse’s budget, potentially helping them qualify for Chapter 7.
Remember: If you deviate from standard IRS numbers in your means test, you may need to provide explanations to justify these variations.
Need Assistance?
As an attorney, completing the means test is part of our comprehensive service when filing your bankruptcy case. Now that you better understand how the means test works in Ohio, let’s discuss your situation and explore your options. Contact me today for assistance.