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Bankruptcy and the means test

Ohio residents who file for bankruptcy must pass a means test that decides whether they are eligible for Chapter 7 or Chapter 13 bankruptcy. The idea behind the means test is to keep the number of people who are able to file for Chapter 7 and most of their unsecured debt discharged lower. However, many people still qualify for Chapter 7 bankruptcy, and others may choose Chapter 13 because they want to keep some assets such as a home. People who are in debt from their business do not have to take the means test.

The means test takes factors into account such as family size, expenses and income. The first part of the test is to see whether an individual's income is below the median state income. If it is, then the test is passed. Most people who want to file for Chapter 7 bankruptcy do not have to go past this point.

For the 12 percent whose income is above the state median level, it is necessary to provide information on expenses. However, people still might choose to restructure their debts under a Chapter 13 bankruptcy instead. An individual who fails the means test also may have the option to wait six months and try again.

Individuals might consider bankruptcy for a number of reasons. For example, it might be necessary because of medical debt or credit card debt that mounts due to job loss. A person who files for bankruptcy can get immediate relief from creditor calls. While most debts can be discharged in a Chapter 7 bankruptcy, student loans usually cannot. However, discharging other debts may free up enough of an individual's income to pay more toward student loans. There are other requirements besides the means test that an attorney can outline.

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