Under the new bankruptcy law, which took effect in October 2005, a mathematical formula called the “means test” establishes an initial determination of the kind of bankruptcy you qualify for: Chapter 7, Chapter 13, or either. This formula takes into account:
- your monthly income
- the amount and kind of your debts, and
- other aspects of your financial situation.
If your annual income is less than the Ohio median income for your household size, then you can file for Chapter 7 or Chapter 13, (assuming you meet other qualifications). If your income is higher than the state median, you must first complete a long list of expense deductions to estimate what your ‘disposable income’ will be over the next five years. The result of this calculation determines whether you can file for Chapter 7, or are left with Chapter 13 as your only option.
When calculating your annual income to compare to the State’s median income level we must take a look at the average gross pay received by the household for the six month period of time prior to the month of the bankruptcy filing. So if you are filing in February 2015, the calculation for means test purposes is August 2014 – January 2015. Typically, the median income levels fluctuate once or twice a year, but for cases filed on or after November 1, 2014 the following median income levels apply to all Ohio bankruptcy cases:
1 person household: $43,276.00
2 person household: $53,551.00
3 person household: $62,134.00
4 person household: $77,367.00
For individuals in excess of 4 you can add $8,100.00 per person to the numbers listed above.
There are some exceptions to when the means test does not apply: (1) when your debts are primarily non-consumer debts; (2) if you are a disabled veteran and your debts were incurred primarily while you were on active duty or engaged in homeland defense activities; and (3) if you are a member of the military reserve or National Guard for the period they are on active duty and for 540 days thereafter, as long as you were on active duty or performing homeland defense activities for at least 90 days.
