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Chapter 7’s road to a fresh start

Sometimes debts become so high that an Ohio person, despite great efforts, may never be able to pay them down barring winning the lottery. In such instance, one of the few ways certain to gain freedom from such a life-defeating burden is bankruptcy.

There are a few types of bankruptcy filings, and individuals generally look to Chapters 7 and 13. For Chapter 7, there are necessary steps a debtor must perform before he or she can successfully get applicable debts discharged in a Chapter 7 bankruptcy.

Credit counseling

Prior to filing, the debtor must undergo approved credit counseling. This must take place within approximately six months prior to filing a bankruptcy petition. Agencies make the approved counseling course conveniently available in person or on the phone or internet. The local bankruptcy court will have a list of approved agencies that the debtor may choose from.

The debtor must also demonstrate that he or she meets the financial eligibility requirements for a Chapter 7 filing. A means test establishes this, and then the bankruptcy filing can follow.

Means test

To be eligible for a Chapter 7 filing, a debtor must show that his or her disposable income after paying for basic survival needs is so low that the debtor cannot realistically pay his or her debts. First, there is the inquiry of whether the debtor’s income is above or below the state median.

If it is below, the debtor has typically met the burden of showing low enough income and can generally be eligible for a Chapter 7 filing. If the income is above the state median, the debtor must undergo a means test to determine if the household's disposable income, after considering the basic survival needs, is nonetheless low enough to warrant a Chapter 7 eligibility. If the disposable income is too high for Chapter 7, a debtor may then look to Chapter 13.

Bankruptcy petition

With a favorable completion of the means test, the debtor’s attorney can draft and file the bankruptcy petition, along with the following schedules:

  • Liabilities and assets
  • Current expenses and income
  • Unexpired leases and other executory contracts

A statement of the debtor’s financial affairs must also be submitted.

Once the debtor's attorney has filed the petition, the debtor is on the road to a fresh start. The debtor is now better able to pursue life unencumbered by debts he or she likely could never have paid off.

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