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What is the Means Test in a Chapter 7 Bankruptcy in Indiana?

In Indiana, any individual filing for bankruptcy under Chapter 7 must show that they do not have the means to repay their debts. There are two ways to do this. If you make below the state median for your household size, then you automatically pass the means test and can file under Chapter 7. Higher-earning individuals, however, have to be able to prove that they legitimately cannot repay their debts. To do this, they must pass a specialized means test that establishes that their income-to-debt ratio is low enough to qualify under Chapter 7. In this article, the Indiana bankruptcy attorney, Chris Arrington, will discuss the Chapter 7 means test, how it works, and when you qualify. 

The median income in India

If your monthly income is below the Indiana state median, then you automatically qualify under the Chapter 7 means test. The state median for a Chapter 7 bankruptcy is updated periodically. It was last updated in 2020 and is subject to be updated again. Currently, the median household income limits in Indiana are as follows:

Household SizeMedian income in Indiana
1 household member$41,250
2 household members$51,926
3 household members$61,021
4 household members$71,113
5 household members $79,214
6 household members$87,313
7 household members$95,413
8 household members$103,513
9 household members$111,613
10 household members$119,713

Your average household income is calculated by averaging your monthly income over the last six months. To determine your annual income, you would multiply this figure by 12 to determine your annual income. If your income is below the state median, then you qualify to file under Chapter 7.

Those who are over the median limit but whose income has declined over the last six months should wait to file for a Chapter 7 bankruptcy. Waiting may bring their income down under the median level for Indiana and allow them to pass the means test without having to go through the added expense of filing separate forms to prove to the judge that they cannot pay their debts. 

If you make more than the state median

Those who make more than the state median must complete the means test by collecting information on their income, expenses, and debts. This is usually performed with the help of a bankruptcy attorney. The process is complicated and depends on several variables, such as where you live, what your allowable expenses are, and what type of debt you possess. Your bankruptcy attorney will perform calculations based on these variables and submit your Chapter 7 bankruptcy petition to the court. Based on that information, the court will decide whether or not you qualify to file under Chapter 7 or are required to file under Chapter 13. 

Talk to an Indiana Chapter 7 Bankruptcy Attorney Today

Bankruptcy filings are complicated and require the aid of an experienced Indiana bankruptcy attorney. Chris Arrington helps Indiana residents wipe their debts clean and start fresh. Call our office today to schedule a free consultation and learn more about how we can help. 

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