Over Median Income - expenses on means test

[Sham11801]

Being in NY, i get to benefit from larger expense deductions since im over the median income for a Ch 7. My household will be 3, so my question is with the IRS allowances, can i take the full amount of lets say food,clothing, other items for $1152 or what we actually spend which is a bit less? Same thing with the other allowances like healthcare, which would be $60 per person totalling $180. Im sure i saw this clarified on other threads but i cant seem to find it..
Thanks!

[justbroke]

Being in NY, i get to benefit from larger expense deductions since im over the median income for a Ch 7.

I wouldn't say that statement is entirely true. Expense deduction (on Schedule J) is always based on your actuals, and is subject to challenge by the Trustee even when they meet or exceed the IRS Allowances. The values you'll use on the Means Test will be based on the IRS allowances.

My household will be 3, so my question is with the IRS allowances, can i take the full amount of lets say food,clothing, other items for $1152 or what we actually spend which is a bit less? Same thing with the other allowances like healthcare, which would be $60 per person totalling $180. Im sure i saw this clarified on other threads but i cant seem to find it..

On the Means Test (form B22A) you take the IRS Allowance since you are over the median. However, on Schedule J, you use your actual amount. Whether the amounts on Schedule J and Form B22A are similar will be based on your actual costs in those areas. Some attorneys like to make sure they closely match. Remember though, Schedule J is actual with a skew towards the future.

[Sham11801]

I wouldn't say that statement is entirely true. Expense deduction (on Schedule J) is always based on your actuals, and is subject to challenge by the Trustee even when they meet or exceed the IRS Allowances. The values you'll use on the Means Test will be based on the IRS allowances.

On the Means Test (form B22A) you take the IRS Allowance since you are over the median. However, on Schedule J, you use your actual amount. Whether the amounts on Schedule J and Form B22A are similar will be based on your actual costs in those areas. Some attorneys like to make sure they closely match. Remember though, Schedule J is actual with a skew towards the future.

Thanks for the response. Im a bit confused at your response. If im allowed to use the IRS allowance amount, why would it be challenged. Whats the point?

Since I am over the median income, I am guessing I would continue to the means test and deduct the IRS allowed expenses (or is it actual?). I think id be negative disposable income either way, actual or allowed, however its not borderline if i use the IRS allowed amounts.

[justbroke]

Thanks for the response. Im a bit confused at your response. If im allowed to use the IRS allowance amount, why would it be challenged. Whats the point?

You misunderstand me, the Bankruptcy Code, and how the U.S. Trustee thinks. On Form B22A, the Means Test, you can absolutely use the IRS allowance amount without any question at all. However, when it comes to Schedule J which is your Current Monthly Expenses, they need to be actual. While I already tempered what I wrote with adding "is subject to challenge" by the Trustee, I'll repeat it here.

With you being over the median, the Trustee will be more interested in your case. If you are filing with over $100K in unsecured debt, the U.S. Trustee will get very interested in your case. This will increase the level of scrutiny and they will surely be "nit-picking" over expenses.

Since I am over the median income, I am guessing I would continue to the means test and deduct the IRS allowed expenses (or is it actual?). I think id be negative disposable income either way, actual or allowed, however its not borderline if i use the IRS allowed amounts.

On the Means Test (form B22A), you take the IRS allowed expenses since you're over the median. However, on Schedule J, you would use actuals or the IRS allowances, whichever is less. There are cases where you can go over the IRS allowances, but you have to be prepared to document the expense... and not all expenses allow you to go over. An example of going over, is the energy expense. Energy costs fluctuate and I myself put in an additional $250/month for home heating/cooling costs at the time I filed.

I'm trying not to confuse you on the difference between Schedule J and Form B22A (Means Test). They serve two different purposes and, unfortunately, the Means Test (B22A) just confuses things for people.

You should be concentrating on your expenses for Schedule J, since the Means Test is mechanical and most expenses are already "figured out" for you. If you're negative on the Means Test, that doesn't mean you'll be negative on Schedule J.