if you're contemplating filing for bankruptcy

In recent years, Americans have found themselves struggling with unprecedented levels of debt. Huge mortgage payments, soaring car payments, and credit card debt have left many overwhelmed and feeling financially trapped. if you’re contemplating filing for bankruptcy, you’re not alone. Understanding the bankruptcy system can help provide a path to financial stability- a crucial first step. 

U. S. Debt: An Overview

Credit Card Debt

Total US credit card debt has reached a reported $1 trillion. This record high debt burden is compounded by higher interest rates and goods inflation making it impossible for consumers to pay down balances. 

The average American household now carries a credit card balance of over $8000, with interest rates usually exceeding 20%. For many consumers, this means that they are paying a significant portion of their income towards interest payments and not reducing their overall credit card balance. 

Mortgage Payments and Rents

Over the last few years, the housing market has seen substantial increase in prices, mortgage payments, and rents.  Many homeowners and renters are now paying 40% of their income towards their mortgage or rent. The average monthly mortgage payment is now $2000 per month nationwide. 

Car Payments

The cost of owning a vehicle has also dramatically increased. Average car payments now exceed $600.00 per month. Americans are spending more on their cars than ever before. This is compounded by higher interest rates, making it difficult to stay on top of car payments without sacrificing other essential spending. 

The Role of Bankruptcy 

For those drowning in debt, bankruptcy is a powerful tool for resetting one’s financial landscape. Here’s how: 

  1. Immediate Relief Through the Automatic Stay: Filing for bankruptcy triggers an automatic stay which halts collection actions against you. No more harassing phone calls, wage garnishments, foreclosure proceedings, or car repossessions. The Automatic Stay provides immediate relief while you discharge your unsecured debt or reorganize your debt under chapter 13.
  1. Discharge of Unsecured Debt: One of the most significant benefits of bankruptcy is the discharge of unsecured debts – usually everything but car, mortgage, and student loan debt. Chapter 7 will wipe out unsecured debts, giving you a fresh start. While not all debts are dischargeable in Chapter 7, by eliminating a substantial portion of your debt, you can significantly reduce the financial stress.
  1. Structured Repayment Plans: If you choose chapter 13 bankruptcy, you will enter a court approved repayment plan on your debt. This plan consolidates your debts into one manageable monthly payment over three to five years, usually significantly reducing the total amount of debt. Chapter 13 will also stop a mortgage foreclosure and allow you to catch up back mortgage payments thereby saving your home.
  1. Asset Protection: Contrary to popular belief, filing for bankruptcy doesn’t mean you lose everything, or anything, in most cases. State and federal bankruptcy exemptions allow you to keep essential assets like your home, car, and retirement accounts.

Is Bankruptcy Right for You? 

While bankruptcy offers a lifeline, it’s not a decision to be taken lightly. It is essential to weigh the pros and cons and consider how it will impact your financial future. By consulting with one of our expert bankruptcy attorneys, we will provide you with personalized advice tailored to your specific circumstances, helping you make an informed decision. 

Record levels of debt are putting immense pressure on American households, but there is hope. Bankruptcy offers a fresh start, relieving you of the burden of insurmountable debt providing a pathway to financial freedom. If you find yourself overwhelmed by credit card debt, high mortgage payments, or excessive car payments, exploring bankruptcy as an option could be your first step towards regaining control of your financial future. Remember, seeking help is a sign of strength, not failure, and taking proactive steps today can lead to a brighter, more secure tomorrow. 


Paying Back 1% of Your Debt

Are You Really A High-Income Debtor?

Many people with relatively high income assume they cannot file for Chapter 7 bankruptcy.  Usually this assumption is incorrect.  It is not unusual for a high-income debtor to file  Chapter 7.  In reality, high-income Chapter 7 bankruptcies are filed everyday.

What constitutes as high income depends on many factors, such as where you live, your living expenses, the size of your family, etc. For example: a salary of $80,000.00 for a family in rural Ohio goes a lot further than the same earnings in the city center of Columbus or Cincinnati.  With that being said,  a “high-income debtor” is a debtor with earnings above the state median income for the debtor’s family size.

The Ohio state median income per family size (determined by census figures) as of  2023 is as follows:

Individual Family of 2 Family of 3 Family of 4
$57,364 $70,490 $84,176 $101,907

*For each additional family member over four, add $9,900.


Whether your income is above or below the Ohio state median income determines if you will be able to discharge all or most of your debts in Chapter 7, or be required to pay back at least a portion of your debt under Chapter 13.  If your average gross earning for the six months before filing for bankruptcy is at or below the state median for your family size, you may file under Chapter 7 (assuming you meet other requirements).

On the other hand, if your average gross earnings for the six months before filing is over the median, your attorney will perform a  “means test” to determine if you qualify for Chapter 7.  This means test considers your income minus certain allowable expenses.  Frequently, the results allow a debtor with substantial earnings but high expenses to file Chapter 7.


Before jumping to meet the means test, debtors need to determine if they are actually high-income debtors for the purposes of the test.  We often have clients with seemingly high earnings who are surprised that they fall below the state median. Many of these clients have not considered the size of their families. One of the most important factors in determining whether or not you are a high-income debtor is family size.

Even if the debtor is above the state median, it is often by much less than the debtor presumed.  The closer your overall earnings are to the state median, the easier it is to pass the means test.


If you appear to be over the median, you may still be able to avoid the means test, depending on what type of earnings you have.  Not all sources of money count as income for calculating gross earnings.  For example, under the Bankruptcy Code certain income, primarily social security, is excluded from your gross income for the purposes of the means test.  This exclusion will often bring a debtor’s gross earnings below the state median, thus avoiding the means test.  In addition, because the bankruptcy code focuses on “regular income”, some irregular earnings may not count as “gross income”.


Finally, even if you must take the means test, it is still quite possible that you will qualify for Chapter 7.  Very often, high-income debtors have high allowable expenses, including mortgage payments, vehicle payments, etc., that will offset their earnings.  Although the means test is complex and must be handled carefully, it is not at all unusual for high-income debtors to pass the test. However, failing to list income of any kind can lead to unpleasant consequences.  Attention to detail is the name of the game.


We have spent most of this blog discussing the initial qualification for Chapter 7.  However, it is important to note that even if you pass or avoid the means test, you do not automatically get to file  Chapter 7.  You must meet all other requirements, including a showing that after expenses, you have no significant disposable income to pay your creditors.  In addition, there may be a reason for choosing Chapter 13, such as saving a house from foreclosure or a car from repossession.  In some cases, a non-bankruptcy solution such as debt negotiation may be available.