Chapter 7 Bankruptcy Means Test
The deciding factor in determining who qualifies for Chapter 7 bankruptcy in Oklahoma is the Means Test, which is a financial indicator of household income. With the new income figures put into effect on March 15, 2011, households of all sizes in Oklahoma are allowed to file Chapter 7 bankruptcy with a slightly higher gross income than was previously accepted. These median income figures for Oklahoma households are as follows:
- $36,884 (one person household)
- $49,711 (two person household)
- $54,135 (three person household)
- $64,037 (four person household)
- Add $7,500 for each individual in the household over four
If a household’s gross income falls below these numbers, the individual or married couple passes the Means Test and automatically qualifies for Chapter 7 bankruptcy. In some cases, a person whose household income exceeds these figures may still qualify for Chapter 7 bankruptcy if he or she has enough allowable expense deductions to offset his or her median income, or if the projected amount of disposable income would pay less than 25% of the total unsecured debt. A person who fails the Means Tests, and does not qualify to file Chapter 7 bankruptcy, may instead decide to file Chapter 13 bankruptcy.
Chapter 13 Bankruptcy Means Test
Chapter 13 bankruptcy utilizes a repayment plan to help debtors with regular income repay all or part of their debts. A typical Chapter 13 repayment plan is 36 to 60 months long, during which you make a monthly payment to the Chapter 13 trustee, who then divides the payment among your creditors according to the court-approved repayment plan. According to the new bankruptcy law put into effect in 2005, individuals who can afford to make payments towards their debt under Chapter 13 bankruptcy can do so as long as they earn more than the median income in Oklahoma, in which case Chapter 7 bankruptcy would no longer be an option.
At this stage of the Means Test, the debtor’s income less living expenses is multiplied times 60; the resulting figure represents the amount of income available over a five-year period for repayment of debt obligations. If this figure is $10,000 or more, then Chapter 7 bankruptcy would be denied and Chapter 13 bankruptcy would be required. In other words, anyone earning above the state median and with at least $166.67 per month of available income will automatically be denied Chapter 7. If the individual’s income is above the median for Oklahoma, but he or she does not have at least $166.67 per month to pay towards his or her debt, the final portion of the Means Test comes into play. If the available income is below $100, Chapter 7 becomes an option; if the income is between $100 and $166.66, then it is measured against the debt as a percentage, with 25% being the benchmark.