Understanding The Ohio Bankruptcy Income Limit

Ever since the Bankruptcy Abuse Prevention and Consumer Protection Act (BAPCPA) became law in October, 2005, anyone looking to file bankruptcy under chapter 7 needed to know what the 'means test' is and that they must pass it. This test compares your current income with the median Ohio income level to make sure you are below it. If you are below the median, you will be eligible to file for bankruptcy under chapter 7. If your current income is above the median, then you may have to file for bankruptcy under chapter 13.

How Do You Calculate Income For A Means Test?

Individuals looking to file for chapter 7 bankruptcy will need to first compile their total income for the past six months. Income would include salary or gross wages from a job, along with spousal or child support, earnings from an owned business and investments, and both unemployment and retirement income, among other possible sources. The resulting six-month total is then divided by six, in order to find a rough monthly income amount. This sum is then multiplied by 12 to find annual gross income.

What Is The Bankruptcy Means Test?

Once annual income is estimated, the court will compare this total with the state limit. If it is below state median income levels for your household size, then you have passed the means test. The court has determined that based on income, you will not have enough discretionary funds to pay down debt while also taking care of essential, everyday expenses. However, the higher your income is, the less likely the court will be to permit a bankruptcy filing. That said, even if a debtor fails the means test, they may still qualify for a chapter 7 bankruptcy if the bankruptcy attorney can compile the needed information to present to the court.

In addition to the determination of median household income and how it stacks up against the legal limit in your state, household expenditures also come into play. This is relevant for those who do not at first pass the means test based on their income alone. For these individuals, they would move on to step two, in which the regular living expenses they have the responsibility to pay–e.g. rent, mortgage, food, clothes or medical bills–will be compared to their income. If their living expenses do not leave enough discretionary income for debt repayment, then with the help of a bankruptcy attorney they may still qualify for a chapter 7 bankruptcy filing.

At times, when calculating income for a means test, an individual may find that there are inconsistencies or anomalies in the past six months that are not in line with their typical income and could artificially inflate their earnings on paper. For these and other reasons, anyone looking to file for bankruptcy should speak with a trusted and experienced Ohio bankruptcy lawyer to ensure that they are presenting the court with the most accurate information and that they are being treated fairly. 

Note: Those who do not have primarily consumer debts or are a disabled veteran who incurred the debt in question while on active duty are typically exempt from the means test. If your debts consist mainly of business expenditures, then chapter 7 bankruptcy will not be a viable option for you. Your bankruptcy attorney can help you to determine the best course of action.

What Is The Maximum Income For Chapter 7 In Ohio? 

The law in Ohio states that you will be eligible to file for bankruptcy under chapter 7 if your current annual earnings fall below the median earnings of a household that is similar in size to yours. To put this into perspective, and according to the latest census data from 2022, the amounts are as follows:

• Sole earner: $54,877
• Two earner home: $70,209
• Three earner household: $82,734
• Four earners: $100,693

Each additional person in a household (beyond four people) who earns an income would add $9,900 per person to the total median income amount. Once you’ve figured out your household’s median income and compared it with Ohio’s state median amount, you’ll see where you stand. 

Personal income was up nationwide in 2023, with Ohio seeing a 3.7% increase in the state average. This could affect an eventual update in the state median income level as it pertains to the bankruptcy means test, but we’ll have to wait for an official figure from the government. 

If your annual income is below your respective household category median, then you need to discuss with your Ohio bankruptcy lawyer what to do about filing for bankruptcy. If you are over the median income, you may still qualify for a chapter 7 if you pass the means test. Hausen Law will run the means test to determine if you pass it. Contact us for a free consultation if you think this option is for you.

What Is The Maximum Income For Chapter 13 In Ohio?

When you decide to file for bankruptcy in Ohio under chapter 7, there are certain limits with regard to how much you can earn. While the law states that you need to earn below the median income to be eligible to file for bankruptcy under chapter 7, it does not necessarily mean that you cannot file for bankruptcy at all. If you earn above the median income, and your necessary living expenses leave you enough discretionary income to repay your debts, then you will likely be eligible to file for chapter 13 bankruptcy, or a 'repayment' bankruptcy. This kind of bankruptcy filing is better for people who have a lot of property that they would like to retain. It is also beneficial for people who have sufficient equity.

Seeking Advice About Bankruptcy in Ohio?

The median incomes set by your respective state will need to be referenced before you file for bankruptcy. You should also check for the median incomes corresponding to the earning members in your household. Contact our Northeast Ohio Bankruptcy Attorneys before you move ahead with the filing of your bankruptcy to improve your chances of succeeding and  ensure that all paperwork is in place along with your petition.

During tough financial situations, filing for bankruptcy might be your last resort. This helps you protect whatever assets you have and prevents you from getting sued by creditors. It also gives you a little time to build back your finances and rebuild your reputation along with your credit. Bankruptcy can also help you to focus on the future rather than worry about paying back mortgages and loans that were falling behind. Filing for chapter 7 or chapter 13 bankruptcy in Ohio can also give you a little wiggle room with your insurance premiums and prevent damage to your reputation. While it might initially seem difficult to file for bankruptcy, with the help of an expert it can be the best way to start afresh and wipe your financial slate clean. Once bankruptcy is in the past, you can give yourself another chance at financial recovery without carrying any baggage along. 

For help with all things bankruptcy in Ohio, our skilled and experienced bankruptcy attorneys are here. Hausen Law is happy to serve all of Northeast Ohio, including the Akron, Canton, Cleveland, Wooster, Dover/New Philadelphia, and Youngstown communities. Contact us today to set up a free consultation or to inquire about our credit counseling and credit repair programs.