Do You Qualify for Chapter 7 Bankruptcy in Oklahoma Under the Means Test?

If you are considering filing for Chapter 7 bankruptcy, you must first pass the means test. Many potential bankruptcy filers consider the means test overwhelming. The good news is that you do not have to figure it out by yourself! The Henson Law Firm helps clients successfully navigate their Chapter 7 bankruptcy filings and will do the same for you.

We can quickly and effectively determine whether you are eligible to file a Chapter 7 bankruptcy in Oklahoma. During your first meeting, with the accurate income information you provide, we will calculate your current monthly income, and determine whether you qualify for Chapter 7, as opposed to Chapter 13 bankruptcy.

Understanding the Chapter 7 Means Test

Not every individual who has substantial debt is eligible to file a Chapter 7 bankruptcy in Oklahoma. In order to prevent abuse of the system (and supposedly creditors) Congress created a bankruptcy means test. The means test is a two-part test that was designed to force debtors who (1) have primarily consumer debt (credit cards, medical debts, etc.) and (2) have the ability to pay a portion of their debts, to do so by entering into a five-year repayment plan through a Chapter 13 bankruptcy rather than a Chapter 7.

The means test is based on your current monthly income as defined by the Bankruptcy Code. This is your average monthly income earned over the previous six calendar months before you file for bankruptcy protection. If you are filing a joint petition with your spouse, his or her income is included in the calculation as well. Other contributions to your household expenses are also added to the current monthly income figure. For example, say family members have been helping pay your electric bill or your cell phone bill. Those contributions to your expenses must be calculated as income for the means test. However, Social Security, disability payments, VA disability, or certain victim-of-crime payments are exempt from the calculation.

Part One of the Means Test: Are Your Debts Primarily Consumer Debts?

If 51 percent of your debts are business debts incurred because of a business you operate, then the answer is no, your debts are not consumer debts and you do not have to worry; you can skip the means test. If your debts are from personal credit card expenses, medical expenses, or judgments from non-business activities, you must process to the second part of the means test.

Part Two of the Means Test: Is Your Current Monthly Income Lower Than Oklahoma’s Median Family Income?

If your income is lower than the median income in Oklahoma, based upon the county where you live, you have passed the means test and can skip the next questions. If your income is higher than the median, then further calculations must be made under the means test regarding your monthly disposable income.

What is Your Monthly Disposable Income? You disposable monthly income is determined by subtracting living expense amounts that have been established by the IRS.

National standards are used for food, clothing, and health care, but local, Oklahoma standards are used for housing, utility, and transportation expenses. These national and local standards are used, regardless of whether your actual expenses are more or less than the standard amounts.

Then the result is multiplied by 60 to determine the amount of disposable income projected to be available over the next five years. The calculations will determine whether you have any disposable income leftover to pay your debts. If you do not have much disposable income available after the deductions, you will pass the means test and qualify to file a Chapter 7 case. Otherwise, you will very likely have to consider filing for a Chapter 13 bankruptcy.

In addition to the means test, anyone seeking to file Chapter 7 bankruptcy in Oklahoma must complete a credit counseling course, unless he or she is disabled, incapacitated, or deployed on active duty in a military zone.

Need Help With the Chapter 7 Means Test? Call 918.551.8955 or click “Schedule a Free Virtual Consultation” on our website to setup a FREE and confidential initial consultation with a bankruptcy attorney in Tulsa to answer your questions about the means test and begin working toward securing your financial future.

*We are a debt relief law firm in Tulsa, Oklahoma.

*We help people file for bankruptcy relief under the Bankruptcy Code.