When individuals file for Chapter 7 bankruptcy in Oklahoma, one of the first steps in the process is taking the Means Test. This financial test determines whether you qualify for Chapter 7—which can eliminate most unsecured debts—or whether you might need to file Chapter 13 bankruptcy, which involves a repayment plan.
How Does the Means Test Work?
The Means Test was created to prevent high-income earners from using Chapter 7 to avoid debts they could repay. It helps ensure that bankruptcy relief is available to people who truly need it.
The bankruptcy court looks at your income, expenses, and family size through the following process:
Step 1: Compare Your Income to the Oklahoma Median
The first step is to calculate your average income over the past six months and compare it to the median income for a household of your size in Oklahoma.
- If your income is below the median, you automatically pass the test and can file for Chapter 7.
- If your income is above the median, you proceed to Step 2.
Step 2: Determine Disposable Income
In Step 2, you subtract certain allowed expenses, such as:
- Housing and utilities
- Food and clothing
- Medical costs
- Taxes and insurance
- Secured debt payments (like a car loan or mortgage)
The amount left over is your disposable income. If your disposable income is too high, you may not qualify for Chapter 7 and may need to consider Chapter 13.
Why the Means Test Matters
Passing or failing the Means Test determines:
- Which bankruptcy chapter you can file under (Chapter 7 vs. Chapter 13).
- How much you might need to repay your creditors if you file Chapter 13.
For many people, passing the Means Test means they can discharge most debts, such as credit cards and medical bills, in a matter of months. However, some people do not have to take the Means Test, including disabled veterans whose debts were incurred during active duty and individuals with primarily business debts rather than consumer debts.
Creek County Bankruptcy Attorneys
The Means Test is a critical step in the Oklahoma bankruptcy process. It ensures that people who truly need financial relief can get it through Chapter 7, while those with more income may need to file under Chapter 13. Our team at Creek County Attorneys can help you through the bankruptcy process. Call us at 918-209-3709 for a free and confidential consultation or ask a legal question here.
