Question on disposable income

[nicole97]

I am just starting this process. My question is, my lawyer thinks we can get ch. 7. I know the trustees look at disposable income to determine if you can have that or not. The issue is I HAVE the money to pay the minimum payments every month - I always make my payments. But paying those leaves me with NOTHING. We are surviving on hardly any groceries at all and if an emergency of any kind, we would not be able to prepare for it. BUT if you remove that debt, then it would look like I have plenty of disposable income (difference of $1200 a month). Is that a consideration? I don't want them to see there IS disposable income without that debt, because with it, we have nothing. Does that make sense?

[justbroke]

Having money to pay the minimum payments does not mean that you are not insolvent. Bankruptcy is about being insolvent. If you can't afford to eat, live, put a roof over your head, have reasonable entertainment costs, and other necessities... you are likely very insolvent.

Now, if after your allowed expenses you have significant actual "disposable monthly income" (DMI), that can be problematic. But don't panic yet. There are expenses that you are allowed that you may not normally think about. Many people that are insolvent put off a bunch of things and don't pay for certain things. One area is food. It's surprising how many don't know that two people would normally have over a $1,200/month allowance for food, clothing and other personal allowances? (The UST says you get $1,288/month for two people for food, clothing and personal care.).

[nicole97]

Oh wow, no it would have never occured to me that it is that much. We have 5 in our household, so that would be even more I would imagine. I've seen many places that mention a certain amount toward entertainment as well. That surprised me. That seems like something that would be a luxury and not considered.

[justbroke]

What if i told you that the food, clothing and personal expense "allowance" (from the IRS and United States Trustee) was $1,786 for four people? What if I told you that you get $420 more per month for each additional person? That means you should have budgeted an expense of $2,206/month for food, clothing and personal expenses. Of that $2,206... about $1,150 is for food, alone.

People need to be entertained or they will literally (and actually) go insane. A reasonable amount for entertainment is about $50/month. Most Trustees will not complain at that $50/month, so your 5 members of your household could use, combined, $250/month for entertainment. (Entertainment includes magazine and newspaper subscriptions, books, and other things to keep you busy.)

[nicole97]

Wow, those are definitely numbers I would not expect. I would love to have even half of that food allowance available.

[justbroke]

Exactly, but those are the numbers! They are called the National Standards and are based on the IRS Financial Collection Standards (FCS). The IRS' FCS is used by the IRS when they take actions against taxpayers and garnish their pay.

The Collection Financial Standards for Food, Clothing and Other Items are here: https://www.justice.gov/ust/eo/bapcp..._standards.htm

Means Testing Numbers are here: https://www.justice.gov/ust/means-testing/20190501