Schedule J - Expense Questions

[anonymous123]

I am helping a debtor file for Chapter 7. Debtor passes the means test (as earns under $30k for a household of 1), but there is $1,000 per month in disposable income in Schedule J. The debtor lives at home, pays no rent or expenses, makes no car payments, etc., and only has $800 in expenses (gas, food, insurance, misc.). Should I tell the debtor to pay rent to his parents in order to bridge the gap? If so, how much? What documents do you send to the trustee to prove rent if there is no lease?

I thank all those who reply.

[despritfreya]

What you should tell the debtor is to find a good attorney.

Des.

[smoothdaddy]

Hang in there anonymous123. There are plenty of knowleageable forum friends here who can properly answer your question.

[anonymous123]

Thank you Smoothdaddy - I was a little discouraged after seeing the first reply post.

[despritfreya]

I was a little discouraged after seeing the first reply post.

Sorry to discourage you but it appears you are "advising" someone as it relates to a legal matter.

Maybe you are simply trying to help a friend. Maybe you are a document preparer trying to practice law. Regardless, it is very dangerous (and possibly illegal) for you to give legal advice.

The reality is, if this person has disposable income using this persons true and correct living arrangements, one should not be advising this person to commit fraud, which is exactly what you would be doing if you are advising this person to manipulate the system. If you are a friend (not someone trying to make a buck) then your best advice to your friend would be for him/her to seek proper legal assistance.

I say the above, not because I am an attorney. I say the above because my firm ends up taking over cases that have been ruined as a result of folks trying to give legal advice - even if that advice was given with the best of intentions. In the end all I end up doing in such cases is damage control.

Des.

[ValleYum]

I think any BK Trustee worth his salt would see right through the 'lease'. And if asked to show the money trail (from the rent $$) - your friend's parents would do what? They'd be in trouble I would think in a legal manner, too. Just being honest here.

He could possibly buy a new/newer car for around $400-500 per month - because he may need one if he winds up in a Ch13.

Your friend can't pay off his creditors with the extra 1k in DMI? Or set up payment plans? What is his total amount of debt? Some parts of the story are missing.

Regardless, I hope your friend does well.

PS: I just saw Des' answer... listen to him - for he know of what he speaks!!

[anonymous123]

Thank you to all those who replied. I told the debtor to document all expenses for the upcoming month as he claims he has no disposable income (he has not been paying his credit card debt for years). Clearly there are expenses he is not capturing. As I already know, with disposible income he WILL end up in a Chapter 13 dispite passing the means test.

A little about me - I AM an attorney who practiced bankruptcy law under the old laws prior to 2005. Currently, I practice in an entirely different area of law. My friend asked for help and I thought that I would give it a try. I have NO intention of having my friend comit fraud in any way by "making up" a lease. On the contrary, I want my friend to secure proper housing (ie., an apartment) so he is not in a Chapter 13 for the next 5 years and forced to live at home, or pay his parents rent (wait a few months) and then file.

If his expenses do not equal or exceed his income, I will have him seek the help of another attorney (specializing in BK).

Please let me know if this advice seems good. I am not trying to give legal advice "illigally" - just not my specialty. Thanks.

[despritfreya]

As I already know, with disposible income he WILL end up in a Chapter 13 dispite passing the means test. A little about me - I AM an attorney who practiced bankruptcy law under the old laws prior to 2005. . .

What you are looking at is no different then under the "old" laws. "Income minus expenses, whatever is left over goes to the Trustee." However, since your friend is below median income, he only has to commit to a 3 year Chapter 13 - again, no difference.

While you are not actively representing debtors in bk today, you may want to sign up for one of the talk lists. Be careful. . . I am a member of the Roundtable and I have never tried to deactivate. Once in a while some desperate sole posts a thread that he/she wants off the list but can't figure out how to get off.

1. The Bankruptcy Roundtable. An open, unmoderated forum for use by bankruptcy professionals to pose questions and comments about bankruptcy related issues arising in real-life situations. To subscribe, send an e-mail message saying "subscribe roundtable <your e-mail address>" to: [email protected].

Law Journal EXTRA! has created a searchable archive of this mailing list. It can be found at: http://www.ljx.com, under "LJX Forums," "National Forums."

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Best of luck.

Des.