Expenses - seem high, but legit. Thoughts?

[NoTomatoCan]

Ok, so I have 2nd meeting with attorney this week. After interviewing several, the one we went with seems the most likely give personal attention and has good level of experience. We passed on a more experienced attorney simply because of the feeling that we would get pawned off on associates or paralegal.

Anyway... Here is our list of expenses (and some stats).

Mortgage: $1350
Electric: $175
Propane (heat): $283
Telephone: $60
Cell Phone: $110
Garbage Collection: $30
Sattelite TV: $90 (we live in extreme rural area - no cable or OTA reception)
*Home Maintenance: $250
*Food: $626
*Clothing: $180
Laundry/Dry Cleaning: $55
Transportation (not including car payments): $671
*Recreation, clubs, & entertainment, newspapers, mags: $150
*Charitable Contributions: $100
Homeowners Insurance: $78
Automobile Insurance: $275
Property Taxes: $317
Student Loans: $875
401k Loans: $996
Rental Property: $976
Car Payment 1: $405
Car Payment 2: $494
*Household (non-food items): $60
*Hygiene Supplies: $55
Child Care $888
Haircuts: $40
*Cosmetics: 15
*Work Lunches: *50
*Pet Supplies/Pet Care: $75
Professional Licenses: $50


TOTAL EXPENSES: $10,004

We are married with one child. Technically have another one on the way (6 weeks pregnant - just found out!) but those expenses are not yet figured in. We will definitely account for those, but wanted to chat with attorney on how to best handle it first.

Our attorney uses Best Case Bankruptcy software, so these numbers and categories are straight off of that. (except for the last 8 that are under misc.) We know the Student Loans will get thrown in with other unsecured creditors (how our district/trustee handles them).

All items marked with an "*" are estimates. All others are actual expenses. Rental is cash flow positive (barely). It brings in about $75 per month after all expenses. But that is still $75 for the trustee!

I am looking for a sanity check. I truly accounted for everything to help make a livable budget, but was curious as to what others thought. $10k of expenses seems high, but there isn't a ton of padding in there.

Other relevant stats: We are in Eastern District of Michigan. $82k CC debt, $140k Student Loan debt, lien stripping 2nd mortgage of $148k (we hope - appraisal is $5k under what we owe on the 1st), other unsecured debt of about $30k. Gross income of about $200k per year.


Sorry for the uber-long post. Just wanted to get the relevant fact out there and see what others thought.


Thanks!

[jwmc1]

I am also in the Eastern District of Michigan and I was told the same thing on some of my expenses. Are you in the Detroit or Flint court?

[NoTomatoCan]

I am in Detroit. I haven't yet been "told" anything (reviewing with attorney this week) But was hoping to avoid putting in anything that stands out.

What expenses were you dinged on? All of mine that apply are under IRS guidelines.

[jwmc1]

You might be ok, I heard the Detroit court is pretty strict about the expenses. I didn't have the student loans or the child care expense. I am looking at what you have and the only thing I see is the home maintenance...probably about $150 too high. Not sure what they will think of the rental property. I don't see anything else that is too high, but who knows, I am certainly no expert.

[klandsb]

There are only 2 things that concern me.. The mortgage pmt (what is the allowed in your irs standards) and of course the 401k Loans. Some districts really frown of those because you are paying yourself back ??? My lawyer included contributions but did not include my loans...

[NoTomatoCan]

With a family of 3 I am over IRS housing/utilities by about $300, but all expenses are actual and can be proven, so with the exception of the sattelite tv, I can't imagine those raising too much of an issue. (I have already started pulling together the documentation).

The 401k will be an interesting one. Recent positive caselaw is out there now favoring both the conntributions and loan payments. We both also max out our 401k and have for years. This will be one we intend to fight on if the trustee disallows them. We expect some resistance, as our monthly payback to the trustee would end up being less than our 401k contributions and loan payments. (I will post separate threads on that when the time comes!)

[jwmc1]

one of the attorneys I met with seemed to think that the 401k loan repayment would be ok.

[klandsb]

I just think close to $1000 a mth is going to raise some red flags ...

[HHM]

First, any analysis is moot without knowing your income.

Some of those seem objectively high, you will probably need to provide justification.

Off the cuff, the ones I question are
Clothing $180 "per month"
Transportation, $671
Propane $283 (per month), every month it is that???
Home Maintenance $250 (again, every month, or even annually, do you spend $3,000 on regular home maintenance).
Is property tax paid through your mortgage, or do you pay it directly.

Student Loan Payments will stop in chapter 13, so you won't get to claim that as an expenses anyway, so deduct $875 right there.

Actually, the 401K loan repayments will be fine, they are allowed in chapter 13.

[NoTomatoCan]

Thanks HHM. Stated our income (last sentence of post ~$200k per year).

Propane is annually (unfortunately). That is actual expense. 4 tank fills a year at almost $2 per gallon.

Home maintenance is annually, and includes everything from home water filters, salt for softner, and the misc items that come up. It could probably go lower though.

I am glad you pointed out Clothing, that provides a good example of the heart of my question/concern. That one is an estimate, but probably pretty accurate (my wife and I both have to wear professional attire for work). And no, not monthly, but aggregated over the course of a year.

On the IRS means test site:

http://www.justice.gov/ust/eo/bapcpa/20081001/bci_data/national_expense_standards.htm

It says $209 is allowed for "Apparel and Services for a family of 3. $244 for family of 4.

If I keep my clothing and dry cleaning expense below that IRS standard, is the expense ok?

[Kkole425]

We also have propane and our buget is $283.00 a month and we are already in the - on our account. Propane is a big expense. We have no gas heat or water bill so I am think the propane cost will be ok for us. I am worried about my husband and my cell phones. We both have blackberry's for work and need these phones. My husband is a dentist and runs call and needs it to pull up patients records and xrays when he gets a call on the weekends. I work at a hospital and I am on call all the time and I recieve text and email and patients info over my balckberry. I hope they allow this since we can prove they are need for work and we have had them for years and take it off as a tax deduction since they are a work expense. Scrubs we also take off and all the dry cleaning for them. Licenes for him are so much to. Along with the CE classes he has to take. I hope we can get these thru. Good luck to you, can't wait to hear what you find out.

[HHM]

Just saw the "rental property" expense. That needs some explaining.

This Blog does a good job of explaining the issues with rental properties in chapter 13
May I Keep My Rental Property Through Bankruptcy

If the rental property is not paying for itself, the court is likely to disallow the entire expense, or are you already planning on surrendering the property?

[NoTomatoCan]

Kkole425 - Sounds really similar to our situation. Although I am sure my wife would be happy if the trustee disallowed the blackberry for work! My wife's cell is only $40, which balances the $70 I pay per month. Of course, another cost (or benefit?) of living in a rural area, aside from the propane expense, is that we can not rely on cell service where we live and still need to have a land line.

HHM - Yeah, the rental is (barely) cash flow positive after all expenses. Will make about $75 per month in profit. But that is still $75 for the trustee to pay to creditors! Your blog is a good explanation. So we will have $1,050 per month in rental income, $976 in expense (mortgage, tax, ins, upkeep) and $75 left over for the trustee.


I am still curious... If I am under the IRS guidelines, can the trustee raise an objection?

[HHM]

I am still curious... If I am under the IRS guidelines, can the trustee raise an objection?

Generally not.

Also, for the record, that is not "my blog", it just happens to be one that I found that is pretty good and they let you ask questions to it.