Please critique my Schedule J and overall CH7 plan...(Three person household)

[Diesel73L]

The more time I spend on this site the more I realize that BK planning is really a long term thing...with that, here is the timeline I have come up with (our Schedule J which will represent our finances at the end of that timeline will follow):

Present to February 2012 - My wife and I are employed but will likely have to use cards here and there to meet basic expenses (gas, food, heat, etc...)

March 2012 - Stop using/paying cards in preparation for filing, saving for attorney fee, etc...this date is significant because it also puts us at the beginning of the six month lookback period for average gross income. Basically once we have not used or paid on the cards for six months our average will be down low enough to pass the means test.

June 30th, 2012 - My wife receives her last paycheck as she'll be laid off at the end of the school year due to budget cuts. Her position will be eliminated-no chance of rehire, which is basically the story for schools all over our state, so there is little to no chance of her getting a job at another school either. She will begin receiving unemployment July 1st, cutting her salary in half. At this point I will also need to increase the amount of health insurance we carry (from self to family coverage) since my job will be the only source of benefits which will knock my salary down about $200 a month.

October 2012 - File for CH7. At this point we'll have dropped just below the median for our region, so the first of the month will be the earliest we could possibly file.

Schedule J

This has probably been the most confusing part of this whole process, so I'm hoping to get some clarification on what expenses are allowable and reasonable (I know this varies district by district), because I've read conflicting advice here and can't find clear answers on the UST website either. Line by line, here goes...

1. Rent or home mortgage - 2252 This number represents principal and interest, PMI, and property taxes, but not homeowners insurance. For a household in my county, the allowable local housing and utilities standards are $682 for "Non-Mortgage" expenses, and $2014 for "Mortgage/Rent." The breakdown of these is about as clear as mud on the UST site:

Housing and Utilities standards include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, telephone and cell phone. The tables include five categories for one, two, three, four, and five or more persons in a household.

My initial interpretation of this was that the total number ($2014 + $682 = $2696) is essentially intended to cover lines 1 (a-b) and 2 (a-d), but since our property taxes eat up a large portion of that number ($6800 a year/$566 a month) it leaves little room for other expenses. What I'm trying to say is if I added up all of my expenses for everything mentioned in that paragraph, it would come to $2849. Does this mean I'm exceeding the standard and will come under scrutiny? Will I just need to bring in copies of bills to satisfy the trustee?

2. Utilities: (Electricity/heating fuel, Water/sewer, Telephone, Other)

-Electricity and heating I based off of a 12 month average of bills combined with the prorated cost to fill our 275 gallon oil tank twice: $330

-Water/sewer/garbage is billed quarterly so I averaged it out to monthly: $85

-Telephone I believe is $25 for landline but I need to double check as its part of a bundle.

-"Other" I used for our two cellphones ($120) plus cable and internet ($125) for a total of $245. This is yet another wrinkle because according to the housing and utilities standards cable and internet is not an allowable expense?

3. Home Maintenance - I used a $100 as a round number-again, this is something that is supposedly covered by the housing and utilities standards, but because of high property taxes its hard to fit all of the expenses into that figure.

4. Food - By the time we file my daughter will be a year old, so I used the national average for food for a family of three-$639.

5. Clothing - Again, I used the national average figure, which goes by "apparel and services" which I'm guessing refers to clothing and dry cleaning. The total figure is $209 for a family of three, so again I used that number and simply broke it up using $159 for clothing (which is probably not too far off considering our daughter will be growing like a weed) and $50 for dry cleaning which we don't do too often.

6. Laundry and dry cleaning - We have our own washer and dryer so laundry cost is really split between water/sewer, groceries, and electricity. See above for the explanation about dry cleaning: $50.

7. Medical and dental expenses - Once again used the national average of $60 a person for $180 a month which is probably right since my daughter will be born with a lung condition that will need surgery and followup care and my wife was just diagnosed with Lyme disease, but we will have decent insurance through me.

8. Transportation - We have two cars-the average for the NYC region is $684 for operating costs. I have a long commute and a high mileage truck so that should be right for me. Obviously my wife won't be driving much, but her car is 10 years old and approaching 160K.

9. Recreation, clubs, etc... - I put $50 for a nice round number. We get our news from NPR/the internet, don't belong to any clubs, don't go out much, and use our free libraries and state parks for most recreation.

10. Charitable contributions - $5 a week in the collection basket at church for a total of $20.

11. Insurance - Homeowners: $38 and Auto $220.

12. Taxes - N/A - Included in mortgage payment.

13. Installments - N/A - My truck will be paid off once we file.

14, 15, 16 - N/A.

Grand total of expenses: $5077

Average monthly income (Me working carrying family insurance and my wife on unemployment: $4895

Monthly net income: -$182

I'm guessing that a negative net income should help us in theory, at least when it comes to getting our CH7 successfully discharged, though it doesn't bode well for us post BK. I'm hoping that we can find some way to cut expenses even more, maybe I can find a new job or she can, etc...but in the meantime I'm focused on simply getting out from under the debt that is drowning us anyway. Does it look like we have all of our ducks in a row here? For simplicity's sake I am posting an abbreviated version of this below with just the categories, expenses, and total:

Mortgage (taxes included, insurance not included - 2252
Electric and heat - 330
Water and sewer - 85
Phone - 25
Other (Cable, internet, cell phones) - 245
Home maintenance - 100
Food - 639 (National Average)
Clothing - 159
Laundry and dry cleaning - 50 (Apparel and services National Average is 209)
Medical and dental - 180 (National Average)
Transportation - 684 (NYC Metro Area Average for two vehicles)
Recreation, etc... - 50
Contributions - 20
Insurance (Homeowners, life, health, auto, other) - Homeowners - 38/Auto - 220
Installments - N/A
Alimony - N/A
Support payments - N/A
Business expenses - N/A
Other - N/A

Total: 5077

Income: 4895

Net income: -182

[Pandora]

I'm guessing that a negative net income should help us in theory, at least when it comes to getting our CH7 successfully discharged, though it doesn't bode well for us post BK. I'm hoping that we can find some way to cut expenses even more, maybe I can find a new job or she can, etc...but in the meantime I'm focused on simply getting out from under the debt that is drowning us anyway. Does it look like we have all of our ducks in a row here? For simplicity's sake I am posting an abbreviated version of this below with just the categories, expenses, and total:

Mortgage (taxes included, insurance not included - 2252
Electric and heat - 330
Water and sewer - 85
Phone - 25
Other (Cable, internet, cell phones) - 245
Home maintenance - 100
Food - 639 (National Average)
Clothing - 159
Laundry and dry cleaning - 50 (Apparel and services National Average is 209)
Medical and dental - 180 (National Average)
Transportation - 684 (NYC Metro Area Average for two vehicles)
Recreation, etc... - 50
Contributions - 20
Insurance (Homeowners, life, health, auto, other) - Homeowners - 38/Auto - 220


Total: 5077

Income: 4895



Net income: -182

Food seems low - we are a family of 3 and budgeted $600, sometimes we make it..other times..we go over and have to cut from other areas. In this area you need to include pet food, diapers, wipes, health & beauty items, razors, etc.

Medical: Seems very low - while the IRS standard is $60 per person, you need to factor in co-pays, deductibles (if any), all OTC meds, all RX meds, etc.

Transporation: You own your vehicles so where is the $684 coming into play? You cant take the vehicle allowance if you have no car payment if thats where thats coming from. Remember to factor in vehicle inspections, tags, maintenance (oil changes, tire rotations, etc), gas, etc.

Insurance: If you are in a credit profiling state, be prepared for your insurance to go up all the way around. All of ours went up - including Homeowners - all due to filing BK.

Dont forget to factor in personal property taxes (if you have them), pet expenses (vets are expensive), and any other area you may have overlooked (newspaper subscriptions, trash service.). Look into getting on a budget billing plan for your oil / electricity - that way you will always know what the bill is every month.

As to the IRS standards - if you're over median many of the areas are set at the standard, however other areas are allowed to go outside of the number listed. The bigger issue I see is that your house is taking up about 50% of your income - and given you stated even after the BK is done you will have issues paying the bills - it may be time to rethink keeping your current house vs. finding another one that is less a month. Having your wife return to work will result in needing childcare - so you need to factor that in somewhere down the line post discharge as well. As to your vehicles - you need to be able to exempt both of them to keep them given they are paid for. Along those lines, they are older vehicles - what happens when one breaks down and you need another one? How will you afford that?

Some things to think about...especially given you have a child who will need continual care due to issues.

wishing you the best...

[Pandora]

also wanted to add that you're factoring in your wife's UI to pay bills - while that works now... how will you make up the difference once UI goes away?

[LadyInTheRed]

I agree with Pandora that you need to consider giving up your house. If you don't do that, you need to figure out where else you can cut expenses. Figure that out before you file. There is no point in filing BK if you are not going to be able to pay your living expenses after your discharge. You'll just end up right back where you are.

[Diesel73L]

Food seems low - we are a family of 3 and budgeted $600, sometimes we make it..other times..we go over and have to cut from other areas. In this area you need to include pet food, diapers, wipes, health & beauty items, razors, etc.

Since the standard is $639 will I have to show grocery bills? That shouldn't be hard since we're planning so far out, I can make sure that we save six months worth and then average them.

Medical: Seems very low - while the IRS standard is $60 per person, you need to factor in co-pays, deductibles (if any), all OTC meds, all RX meds, etc.

Also shouldn't be difficult to prove since we can save all receipts for that in the months leading up to filing.

Transporation: You own your vehicles so where is the $684 coming into play? You cant take the vehicle allowance if you have no car payment if thats where thats coming from. Remember to factor in vehicle inspections, tags, maintenance (oil changes, tire rotations, etc), gas, etc.

The $684 ($342 per vehicle-one vehicle per person) is operating expenses (inspections, tags, maintenance, fuel) as per the UST website: If a taxpayer has a car, but no car payment, only the operating costs portion of the transportation standard is used to figure the allowable transportation expense. In both of these cases, the taxpayer is allowed the amount actually spent, or the standard, whichever is less. The rub here is the last sentence: "the amount actually spent, or the standard, whichever is less." So apparently I have to prove that we spend at least $684 per month on maintenance? I'm actually guessing we spend more with my commute, the price of gas, etc...hell I think I paid almost $700 for tires for my truck two years ago!

Insurance: If you are in a credit profiling state, be prepared for your insurance to go up all the way around. All of ours went up - including Homeowners - all due to filing BK.

Not sure about NJ-I know there was talk of legislation banning it in the past, not sure if it ever passed.

Dont forget to factor in personal property taxes (if you have them), pet expenses (vets are expensive), and any other area you may have overlooked (newspaper subscriptions, trash service.). Look into getting on a budget billing plan for your oil / electricity - that way you will always know what the bill is every month.

All good points-no personal property taxes here-they just kill you on the property taxes on your house ;) I didn't factor in pet expenses (we have one dog) because I figured the trustee would look at them as a "luxury." No need for newspaper/magazine subscriptions-we read them at work/the library, get news online, and listen to NPR (it's the best source of news anyway)-trash bill is included in water and sewer as its all administered by the town. We are going to do the budget plan for oil and electric-$330 is what it will come to.

As to the IRS standards - if you're over median many of the areas are set at the standard, however other areas are allowed to go outside of the number listed. The bigger issue I see is that your house is taking up about 50% of your income - and given you stated even after the BK is done you will have issues paying the bills - it may be time to rethink keeping your current house vs. finding another one that is less a month.

The house is at least $20K underwater right now and with the stock market tanking the way it is I don't see housing making any kind of comeback soon. My hope is that we can get through CH7 without reaffirming and just "staying and paying." That way if worse came to worse we could always walk away.

Having your wife return to work will result in needing childcare - so you need to factor that in somewhere down the line post discharge as well.

She is entitled to 99 weeks of unemployment, we'll figure that out when we need to. Post discharge if she can get another job as a teacher later down the road and get her salary back up to what it was we could easily afford childcare since our disposable income won't be eaten up by credit card minimums.

As to your vehicles - you need to be able to exempt both of them to keep them given they are paid for.

The federal exemptions for vehicles plus the unused homestead exemption (no equity) will take care of this.

Along those lines, they are older vehicles - what happens when one breaks down and you need another one? How will you afford that?

Not sure.

Some things to think about...especially given you have a child who will need continual care due to issues.

God willing (and according to the docs at Children's Hospital in Philadelphia) she won't need continual care. She will need surgery at 5 weeks of age to correct a lung defect, then follow-up visits and care until she is a year old, then the only lasting reminder of this will be a scar on her chest.

also wanted to add that you're factoring in your wife's UI to pay bills - while that works now... how will you make up the difference once UI goes away?

Hopefully 99 weeks will be a long enough time to figure things out. I understand what you're saying about planning post BK, but right now the debt is crushing us anyway. Let's say my wife loses her job, I keep mine, and we don't declare BK. We will end up defaulting on the cards anyway because we'll end up diverting money to keep the house and survive-it's not like there's a third option for us. If we find we can't keep the house at least we'll be in a position to walk away from it (as long as we're not forced to reaffirm). Finally, with my wife home with the baby I'd be free to get a second job-the only reason I haven't done that yet is because it makes no sense to work a second job to pay credit card minimums. Post BK a second job would allow us to put money away. Also, as a former high school English teacher with a Masters in Writing my wife could tutor in our home and at the local library. Basically the point is, BK would allow us to at least get to a point where we could feasibly dig ourselves out. Right now we're in a hole and shoveling, but the credit card companies are throwing the dirt back down on top of us. I should also add that I am a hunter and have friends who are hunters who know what we're going through. In a state like NJ there is no shortage of does to shoot and we've gotten meat from friends already-a big help since meat is a big cost driver of groceries anyway. Dropping cable and the home phone would save us about $125 a month. We also have a wood stove and could likely cut the yearly oil bill in half-we could also do a lot more to save electricity-that could net us as much as $100 a month. Since my wife won't be driving much of anywhere, being unemployed, the $342 operating costs will be much lower. Not to mention the fact that her Toyota will likely last forever if its rarely driven and the gas savings-I'd say that's a $200 savings right there. So realistically our budget could look like this:

Food - $500 (Help from our church, mom and dad, and my hunting buddies)
Clothing - $50 (If that-we have a good thrift shop nearby, and there's always yard sales)
Internet only (No TV but we'll keep the cell phones) - $50
Burn lots of wood (easy to find free if you know where to look) and save electricity - $230
Wife's car rarely drives - $142

Total - $1012

Previous Total - $1670

Difference - $658

I hope?

[Diesel73L]

In thinking about this a little more, I ran some numbers with regard to our hypothetical expenses vs. our hypothetical income...

Scenario 1

As part of the BK we surrender the house and rent a two bedroom apartment-$1200 a month in this locale. We would end up saving just over $1400 since not only would our housing expenses drop by $1000, we likely wouldn't have to pay for heat (no more high oil bills), electricity would be cheaper for a smaller place that's easier to cool, no maintenance cost since we don't own it, and no homeowner's insurance premium. Take that number and add it to our current net monthly income (-$187 + $1415) and you get $1228. I would think that a net monthly income of $1228 post CH7 would raise a few eyebrows would it not? I once read on this board that passing the means test is only the entrance exam-passing the Schedule J is the final.

Scenario 2

We keep the house but my wife actively pursues tutoring (she can do it and take care of the baby-her mother, who is retired, has also offered to watch her three days a week) while on unemployment and I take a second job. Between us we bring in about $1000 extra every month. Add that to our current net monthly income (-$187 + $1000) and you still come up with a surplus of $813. I've read on here that if the trustee sees a surplus of more than $100 or so they'll either dismiss the case or force a CH13 which we can't afford anyway.

Am I making any sense here?

[LadyInTheRed]

Yes, you are making sense. You are thinking about how you are going to make ends meet after discharge.

If you decide to go with Scenario 2 and it doesn't work out, you can fall back on Scenario 1. Just don't reaffirm the mortgage. That way you can get the mortgage discharged and decide to walk away from the house later. Just because you say in your BK petition that you intend to stay in the house does not mean you can't change your mind after you are discharged. Also, you don't need to include the income you hope your wife will get from tutoring on your Schedule J because there is no guarantee she'll get tutoring jobs.

[Diesel73L]

Yes, you are making sense. You are thinking about how you are going to make ends meet after discharge.

If you decide to go with Scenario 2 and it doesn't work out, you can fall back on Scenario 1. Just don't reaffirm the mortgage. That way you can get the mortgage discharged and decide to walk away from the house later. Just because you say in your BK petition that you intend to stay in the house does not mean you can't change your mind after you are discharged. Also, you don't need to include the income you hope your wife will get from tutoring on your Schedule J because there is no guarantee she'll get tutoring jobs.

Thanks-I feel a little better now. So all of that said, should we go into our CH7 filing with the Schedule J (negative net income and all) as I first presented it? Or will the trustee object on the basis that he or she thinks that we'll simply end up broke again based on the negative net income? Could they dismiss the case or force us to give up the house as a result?

[LadyInTheRed]

Thanks-I feel a little better now. So all of that said, should we go into our CH7 filing with the Schedule J (negative net income and all) as I first presented it? Or will the trustee object on the basis that he or she thinks that we'll simply end up broke again based on the negative net income? Could they dismiss the case or force us to give up the house as a result?

I don't think the trustee can object because they don't think you can make it after discharge. It's not the trustee's job to protect you in the future. It's his job to make sure your creditors get all they are entitled to. The information you presented seems reasonable to me, but I am not a Chap 7 expert. It is your attorney who can best advise you on what the trustee may object to. No matter what you come up with for a budget, your attorney will probably suggest tweaks. I suggest you take what you've done to your attorney after you retain one and go from there.

I meant to comment on the following earlier:

October 2012 - File for CH7. At this point we'll have dropped just below the median for our region, so the first of the month will be the earliest we could possibly file.

Remember that your income does not have to be below median in order to qualify for a 7. You can be above median and still easily pass the means test. There is no reason to rush if there is nothing pushing you to file like creditors moving to collect on judgements. But, I wanted to make sure you understand this.

[Diesel73L]

Remember that your income does not have to be below median in order to qualify for a 7. You can be above median and still easily pass the means test. There is no reason to rush if there is nothing pushing you to file like creditors moving to collect on judgements. But, I wanted to make sure you understand this.

Thank you-I did know that. We're going to cut up the cards six months from filing, use that money to pay the attorney, and pull the trigger. Basically I was lucky enough to be able to see this financial disaster coming as well as find this site, so rather than going through the wringer of judgements, etc...hopefully we'll only have to field some nasty calls for four or five months. Prior to studying up here I had a much different view of bankruptcy-thank God for this forum!

[ValleYum]

In thinking about this a little more, I ran some numbers with regard to our hypothetical expenses vs. our hypothetical income...

Scenario 1

As part of the BK we surrender the house and rent a two bedroom apartment-$1200 a month in this locale. We would end up saving just over $1400 since not only would our housing expenses drop by $1000, we likely wouldn't have to pay for heat (no more high oil bills), electricity would be cheaper for a smaller place that's easier to cool, no maintenance cost since we don't own it, and no homeowner's insurance premium. Take that number and add it to our current net monthly income (-$187 + $1415) and you get $1228. I would think that a net monthly income of $1228 post CH7 would raise a few eyebrows would it not? I once read on this board that passing the means test is only the entrance exam-passing the Schedule J is the final.

If you take the above scenario and rent, I have two very important words for you: Renter's Insurance.

In a crisis, it is the difference in staying on the gymnasium floor care of the Red Cross or staying at the Hampton Inn care of your insurance company. Renters insurance premiums start at about $15 per month.

There was a big apartment complex fire here a few months back, thankfully no one was killed but out of 24 families only 4 had renter's insurance. Only those 4 families have their lives back to some semblance of normalcy. Food for thought.

Off the soapbox now. LOL

[helpmeout]

I would really reconsider keeping the house. That is one huge monthly payment. If you insist on keeping the house, don't reaffirm it. This way when you realize that it really is too much money, you can walk away from it.

The food is what is allowable. That's what I put on my schedule, my attorney bumped it up a little. Clothing is low, I filed over a year ago in NJ, I have a household of 3 and listed $210 for clothing. You will probably run into problems with the cable, internet and cellphone considering that it is high.

Oh, and since you are planning to file, you really should stop using your credit cards.

[Pandora]

Yes, you are making sense. You are thinking about how you are going to make ends meet after discharge.

If you decide to go with Scenario 2 and it doesn't work out, you can fall back on Scenario 1. Just don't reaffirm the mortgage. That way you can get the mortgage discharged and decide to walk away from the house later. Just because you say in your BK petition that you intend to stay in the house does not mean you can't change your mind after you are discharged. Also, you don't need to include the income you hope your wife will get from tutoring on your Schedule J because there is no guarantee she'll get tutoring jobs.

Agree with Lady - you're planning and looking to the future post discharge on how you will be able to live from there forward. Also agree with Vale - if you rent - get renters insurance, very important to have . Speaking of insurance, dont forget to get life insurance on you, wife, and on the little one prior to filing if you're able. It used to be you had to wait until they were a year old here in VA, however that changed about 12 years ago, not sure what it is in your area, but something to check into so you can add it to your schedules.

Be sure to review your withholdings as well prior to doing anything; if you get a refund back every year, then change it now before you file so that you break even (take into account you'll be adding another member to the family as well). You dont want the trustee to come up with anything that can force you into a CH. 13. I wouldnt change your numbers to lower amounts - some of them were already too low - you need to raise them if you're able that way you have a larger -DMI.

On another note - sending you prayers and positive thoughts on the birth and upcoming surgery for your baby. All will be well

[Diesel73L]

I would really reconsider keeping the house. That is one huge monthly payment. If you insist on keeping the house, don't reaffirm it. This way when you realize that it really is too much money, you can walk away from it.

We've already become semi-resigned to that fact...

The food is what is allowable. That's what I put on my schedule, my attorney bumped it up a little. Clothing is low, I filed over a year ago in NJ, I have a household of 3 and listed $210 for clothing. You will probably run into problems with the cable, internet and cellphone considering that it is high.

I'm going to re-do the budget sans cable and the landline phone. We can get by on just internet, using an antenna for TV, and with the cellphones of course. That should come to about $175 altogether.

Oh, and since you are planning to file, you really should stop using your credit cards.

Right now we just use them when we really need them, like at the end of the month for gas or groceries-we're not trying to defraud anyone, just trying to keep our heads above water until we are able to file. I know that we can't use cards at all 6 months prior to filing.

Be sure to review your withholdings as well prior to doing anything; if you get a refund back every year, then change it now before you file so that you break even (take into account you'll be adding another member to the family as well). You dont want the trustee to come up with anything that can force you into a CH. 13. I wouldnt change your numbers to lower amounts - some of them were already too low - you need to raise them if you're able that way you have a larger -DMI.

We usually get a refund, but the child tax credit is going to bump it up obviously. We think we're going to file in October 2012, so the first return with the child tax credit (April/May-ish 2012) will likely go to paying the lawyer and taking care of necessary expenses, so it will be gone by the time we file. So you're saying that if we're set to get a big refund around April-May 2013 that could cause the trustee to put us in a 13?

[DirkDiggler]

We usually get a refund, but the child tax credit is going to bump it up obviously. We think we're going to file in October 2012, so the first return with the child tax credit (April/May-ish 2012) will likely go to paying the lawyer and taking care of necessary expenses, so it will be gone by the time we file. So you're saying that if we're set to get a big refund around April-May 2013 that could cause the trustee to put us in a 13?

From what I undertstand (and if I'm wrong, I hope someone smarter than me will chime in lol) but if you over withhold, they can use the amount that is overwithheld as DMI. For example if you have $1000 taken from your check monthly for taxes, but you actual tax liability is $600, then they will use that $400 difference as DMI...at least that is how I understand it....

BTW your situation is very similar to my wife and I's....best of luck to you