Expenses Questions

[sunflwrgrl13]

Ok, have have a few questions about expenses we could include in our Ch.7. I will also be asking our lawyer on Monday when he returns to the office.

1) Can we include pet care costs? I actually did ask our attorney about this one earlier in the week and he told us that we couldn't and I don't understand why. This is around $35/mo that we spend and I don't understand why it can't be included.

2) My husband has been out of school long enough that his loans are no longer in deferment. He just received notice that we need to begin paying around $65/mo. Since student loans aren't bankruptable, can we include the payment in our expenses? However, he will likely begin going back to school in Jan, so those payments would end then. We may file on Nov 1 if we can pass the means test. So if we file Nov 1 and include his student loan payment, does it matter that those payments may end in Jan?

3) I have a gym membership and a membership with Ediets.com to help with weight loss and getting healthy. These total about $55/mo. Can these be included in our expenses?

Thanks for any insights!

[ccsjoe]

Hi,

First we need to clear whether you are referring to the means test or Schedule J.

If means test, answer is no on all three counts.

If Schedule J, answer is yes on 1 and 3, and I believe no on 2. The reason being because they are able to be deferred. Shouldn't be much of an issue anyway since you stated these will likely stop in January, so you need to account for that change in expenses on your schedule J anyhow.

[sunflwrgrl13]

Ok. I didn't realize there was a difference between Schedule J and the means test. I just know that our attorney was asking us if we had any other expenses that we could list that would help us pass the means test. When we did the math about 2weeks ago, we were about $300 too much. When we re-do the math 2weeks from now, our income will have dropped (because 2mo of higher income will drop off), but we are still looking for any other expenses that would take us even lower, so that we could possibly have a negative DMI.

So none of the above expenses can help us out on the means test. Can anyone explain to me how this Schedule J is used in a Ch. 7?

[ccsjoe]

Hi again,

The means test is a lithmus test designed to raise a presumption of abuse when determining your eligibility for a CH7. Basically it comprehends a 6-month lookback period in which you create a monthly average of any and all income received in the last 6 months and offset it against expenses for the same time period. The expenses used in the means test for the most part are IRS standardized, not your actual numbers. You may only use actual numbers in a handful of categories.

Schedule J is forward looking. This is what determines whether you have available income at the end of each month to fund a CH13 (payback plan) or if you really belong in a CH7. For schedule J you use your actual expenses, no IRS averages here.

Please look at http://www.uscourts.gov/FormsAndFees...ptcyForms.aspx for all your bankruptcy forms. Form B22A is means test, Form B6I is real income and B6J is real expenses. Additionally, you may want to visit http://www.legalconsumer.com/bankruptcy/nolo/ to take their online means test and link to where you can find the IRS averages for your state and household size for means testing purposes.

[tcreegan]

Hi sunflwrgrl13,

Joe has it right on the mark. Nice job Joe!!

Tom in Colo

[sunflwrgrl13]

Ok, I think I understand the difference between the two. As I understand it, the means test uses the IRS guidelines to determine what figures to use for certain expenses, while the Schedule J looks at actual. So let me ask this: our actual mortgage (between the 1st & 2nd) is around $1500, while I believe the IRS only has around $900-odd. We plan on giving up the house - we have no plans to reaffirm or retain/pay. So which value for the rent/mortgage would be used on the Schedule J since we won't be keeping the house? Would the $1500 be used even though we plan on moving out?

[ccsjoe]

I understand how this may be confusing. You need to mentally separate the means test (IRS guidelines) from Schedule J. The IRS guideline would be used for the means test. The actual expense would be used for J. When do you plan on moving out? Do you know? Do you know what your rental cost is going to be? Will you move out 6 months from today? For now, use the actual amount you are spending. Double check with attorney on Monday as he knows your trustees and what they expect/will accept or not. Bottom line, you need to live there so mortgage or rent amount will not be challeneged unless it is exhorbitant.

[sunflwrgrl13]

I've got them pretty well separated in my head. I was just wondering if we would be able to claim $1500 as our rent/mortgage expense on the ScheduleJ since we plan on moving out. We will likely be here another 6+ months, so no immediate plans to move out. We aren't actually paying the mortgage right now, so wasn't sure if that was somehow factored into the Sch. J. We think our rent (when we finally move out of the house) will be in the $900ish range. So now that I understand how these expenses are being used, I think I'll be asking a few more questions to the attorney about them. We don't need anything coming back to bite us. I'm already concerned enough as it is because my husband and I both are professionals and have earned over $100k/yr (total) the last 5 or so years. I'm not sure how much focus a trustee places on past income, and how will that reflect their opinion about our future potential income?

I've been unemployed since Feb, and with my unemployment income included we are still over the median income for a 2person household and at this point we are still over the means test by a few hundred. I'm considering the possibility of no longer filing for my UI check, even though I'm eligible for it, in order to reduce our monthly income, and then start claiming for them again after we file...but it occurred to me that might not be considered entirely kosher. My UI ends on Nov 30 (unless Congress extends again), so I guess worse case scenario, we have to wait until possibly Jan.1st to file so that my UI drops off the means test. We are just really stressed with everything and really feel out of our element with the whole situation...we never imagined finding ourselves in this situation. I was an engineer& I've gone from making almost $70k/yr down to peanuts on UI. I know there are others worse off than ourselves and that we should be grateful, but it's getting awful hard to be grateful.

[tcreegan]

Hello again sunflwrgrl,

Have you considered a Ch 13 instead of Ch 7? I think you should look into a Ch13 to be prepared in case your Ch 7 doesn't fly.

I'm not sure how much focus a trustee places on past income, the last 6 months, thats it.

how will that reflect their opinion about our future potential income? this comes in when you hit the "are there any reasonably anticipated changes to your income" line. What are the odds you will find a job in the near future? The trustee might ask questions about your employment, do you have a job? are you going to get a job? that sort of thing.

with my unemployment income included we are still over the median income for a 2person household and at this point we are still over the means test by a few hundred. be ready for a Ch 13, just in case

Hang in there!

Tom in Colo

[tiffanydawnn]

No to hijack, but I'm kind of in the same situation. I have actually stopped paying my $1500 mortgage. Do I still list this amount on Schedule J? I will be surrendering the home, but will not have moved out by the time I file.

[tobee43]

No to hijack, but I'm kind of in the same situation. I have actually stopped paying my $1500 mortgage. Do I still list this amount on Schedule J? I will be surrendering the home, but will not have moved out by the time I file.

it's solely going to depend on your district and then depending on your district it could depend on which county you are in and living within THAT district...sound confusing...it is...

we surrendered our home......but listed the mortgage on BOTH the means test and sch j.....why....haven't a clue. however, to me it made perfect sense...if my mortgage, taxes..insurance etc were 4500 monthly....which they were....and i didn't list them, that would mean i had money to pay which after you added in the cc cards....(which my atty also argued should have been left in) and WERE...i have it right in front of me now......

this made NO sense...since as joe points out sch j...are actual expenses or are they...maybe they vary state to state....??? you still owe the mortgage and the cc's at the TIME of filing ...it's confusing and frustrating to say the least. once again...ours WAS counted on sch j....which reads.....CURRENT expenditures of individual debtors.....NOT future.

it is made by estimating the average or projected monthly expenses of the family AT THE TIME the case is being filed. here anyway.

[daylate]

I think I get the diff between means test and schedule J. To see if I'm right,consider the following:

Pass means test no brainer-almost no income for past 6 months other than ssi and expenses that could choke a horse if paid

Now I'm getting ready to file but I get a job. lets say it pays 60k which is over the state median. My expenses going forward are actual(or estimates of actual) and in some cases may slightly exceed IRS standards but are not exorbitant-

Case 1- if the income exceeds the expenses going forward by say 250 a month-being forced into a 13 is possible? definite?

Case 2 - income and expenses are within 100-150 a month, Chap 7 is still good?

Trying to understand this whole process is a nightmare. Thanks for any input.

[backtoschool]

To answer the original question, student loan expenses are not allowed in most districts. Pet care expenses usually can be allowed if they are not that much. Gym expenses will not be allowed.

To answer other questions in the thread, I was a high income filer that filed when I became unemployed and my former salary fell off the look back period, and I was grilled by the trustee on whether I had another job, was looking for another job, etc... Of course as with anything ymmv. Any huge drop in income will be at least looked at though.

[JEM]

To answer the original question, student loan expenses are not allowed in most districts. Pet care expenses usually can be allowed if they are not that much. Gym expenses will not be allowed.

To answer other questions in the thread, I was a high income filer that filed when I became unemployed and my former salary fell off the look back period, and I was grilled by the trustee on whether I had another job, was looking for another job, etc... Of course as with anything ymmv. Any huge drop in income will be at least looked at though.

I wonder if this is one of those things that depends on the area? I asked my attorney about this and he said that gym expenses are fine, just as long as you aren't paying for something like a personal trainer a couple days a week. But a reasonable gym membership was ok.

[ccsjoe]

To answer the original question, student loan expenses are not allowed in most districts. Pet care expenses usually can be allowed if they are not that much. Gym expenses will not be allowed.

To answer other questions in the thread, I was a high income filer that filed when I became unemployed and my former salary fell off the look back period, and I was grilled by the trustee on whether I had another job, was looking for another job, etc... Of course as with anything ymmv. Any huge drop in income will be at least looked at though.

Sorry B2S, but gym expenses, etc depend on the district. I am an above median filer who claimed and did not get questioned about $89/month gym membership, in addition to Costco membership, etc, etc.