• A debtor's income determines the chapter of bankruptcy he can file.check book image by Rob Hill from Fotolia.com
  
  Through the years, individual debtors have preferred filing Chapter 7 bankruptcy to Chapter 13. A debtor may prefer Chapter 7 because the case may be completed in a matter of a few months. At the end of the case, the debtor receives a discharge of unsecured debts, such as credit card debts. The credit card companies strongly opposed the ease with which debtors discharged their credit card debt. These companies lobbied for bankruptcy reform and accomplished it.
  
  

Bankruptcy Reform

• In April of 2005 the Bankruptcy Abuse Prevention and Consumer Protection Act passed into law. As a result, Ohio debtors cannot choose to file for Chapter 7 bankruptcy. Debtors must qualify for Chapter 7 bankruptcy by taking the means test, the most controversial part of the new bankruptcy laws. If the debtor does not pass the means test, he may be forced into a Chapter 13 debt repayment plan.
  
  

Chapter 7

• The debtor compares his family income to the median family income in the state of Ohio. As of 2010, the Census Bureau listed Ohio’s median incomes as: single earner, $41,724; family of two, $52,030; family of three, $61,522; family of four, $73,040. Add $7,500 for each family member in excess of four.
  
  If the debtor’s family income is less than the state median, the debtor can file for Chapter 7 bankruptcy. If the debtor’s family income is more than the state median, the debtor needs to calculate his monthly disposable income. Monthly income minus allowed monthly expenses equals monthly disposable income. If the debtor’s monthly disposable income is less than $100, he can file for Chapter 7 bankruptcy. If the debtor’s monthly disposable income is more than $100, but that amount would not pay at least 25 percent of the debtor’s debts over the next 60 months, the debtor can file for Chapter 7 bankruptcy.
  
  

Chapter 13

• If the debtor’s monthly disposable income is more than $100, and that amount would pay 25 percent of the debtor’s debts over the next 60 months, the debtor fails the means test. After failing the means test, the debtor may either decide not to file for bankruptcy or to file for Chapter 13 bankruptcy. In a Chapter 13 bankruptcy case, discharge of debts does not come easily. The debtor must enter a three-to-five-year repayment plan in which he repays his creditors. In order to receive a discharge, the debtor must make all plan payments and make them on time each month.
  
  The debtor determines the length of his repayment plan by comparing his family income with the Ohio median family income. If the debtor’s income is below the state median, he will spend the next three years repaying his creditors. If the debtor’s income is above the state median, he will spend the next five years repaying his creditors.