How to account for all expenses on Schedule J? Confused...

[Keebler]

Quick background: Below Median Income, aiming for Chapter 7 due to no assets and no income after expenses. Medical expenses over the last six months make my expenses seem artificially big.

I'm a bit confused and have some questions regarding the bankruptcy schedules.

I have captured all of my expenses begining January 2006 by entering all of my credit card and bank statements in to QuickBooks. Most expenses I can account for because of the store's name. Others aren't so easy, like Wal-Mart, Costco and Sam's Club.

One thing that isn't so clear is whether an expense happened when I made a purchase or an expense happened when I paid for the expense. For example, say I bought $3,000 of stuff in a month using credit cards. In addition to my purchases, I was charged $1,000 a month for interest. Then I came along and made payments of $2,500. What were my expenses that month? I paid interest but I can't put it on schedule J, right? I spent more than I earned too, but that shouldn't be used to determine my post-bankruptcy expenses. how should I be figuring this out?

Looking back six months, there's more than a few expenses I can't account for on Schedule J. Interest, late fees, cashed checks. Even the stuff I bought at Costco, Wal-Mart and Sam's Club aren't so clear whether they were food, clothing or laundry and cleaning supplies.

I think I'm supposed to fill out Schedule J based on what I think the future will be like using expenses from the past I am able to document, right? I can't make the Schedule J reflect the past because my expenses exceeded my income. I can't invent new figures becuase I am supposed to use actual expenses.

Head is spinning... please help.

[CATCHMEIFYOUCAN]

A bit confused

I have captured all of my expenses begining January 2006 by entering all of my credit card and bank statements in to QuickBooks. Most expenses I can account for because of the store's name. Others aren't so easy, like Wal-Mart, Costco and Sam's Club.
One thing that isn't so clear is whether an expense happened when I made a purchase or an expense happened when I paid for the expense. For example, say I bought $3,000 of stuff in a month using credit cards. In addition to my purchases, I was charged $1,000 a month for interest. Then I came along and made payments of $2,500. What were my expenses that month? I paid interest but I can't put it on schedule J, right? I spent more than I earned too, but that shouldn't be used to determine my post-bankruptcy expenses. how should I be figuring this out?
Looking back six months, there's more than a few expenses I can't account for on Schedule J. Interest, late fees, cashed checks. Even the stuff I bought at Costco, Wal-Mart and Sam's Club aren't so clear whether they were food, clothing or laundry and cleaning supplies.

I think I'm a bit confused, you wouldn't include what you are paying on your credit as expenses, let alone interest rate and fees?

Make yourself a list of what you THINK you spend money on as far as groceries, clothing, auto payment? transportion (bus? gas?) car repairs?

Do you know what the standards are for your state and whatever you are filing for?

https://www.usdoj.gov/ust

Thats the website that will give you your states IRS Standards. And much need information for filing BK

Now if you go over the standards, you probably have to provide receipts (like those medical expenses).

Best of Luck, CMIYC

Others will chime in to help you out!

[lrprn]

I see what you are trying to do - get very accurate amounts for all of your expenses.

A suggestion - complete accuracy is fine, but at some point you are going to have to make some best guesses. The only time it may be important to be able to prove exactly what you spent is when you need to claim an expense that is significantly over what your district typically allows - as you already mentioned, medical expenses are a common area where a trustee may question them if they are higher than normal. Otherwise I wouldn't go overboard trying to get every single expense down to the penny.

Your lawyer can guide you on what expenses and amounts are typical for your district.

[Keebler]

I see what you are trying to do - get very accurate amounts for all of your expenses.

A suggestion - complete accuracy is fine, but at some point you are going to have to make some best guesses. The only time it may be important to be able to prove exactly what you spent is when you need to claim an expense that is significantly over what your district typically allows - as you already mentioned, medical expenses are a common area where a trustee may question them if they are higher than normal. Otherwise I wouldn't go overboard trying to get every single expense down to the penny.

Your lawyer can guide you on what expenses and amounts are typical for your district.

I originally started down this path to be sure I could file Chapter 7. I know my spending every month exceeds my income, but I didn't know for sure if my legitimate expenses (according to Schedule J) did too. The whole exercise has been an eye-opener, that's for sure. I used to think I was in finincial trouble, now I know for sure and I can see exactly why.

I know that Schedule J is supposed to be based on facts and not on speculation. I also understand that people tend to artificially inflate the figures to show no income remaining. My problem is actually the reverse -- I need to down-play my expenses beyond what I can prove.

Won't I get in trouble for failing to show actual expenses on Schedule J?

For example, I spent money on tuition for the kids. There's no place on Schedule J for this expense and no income available to support it for that matter. In reality, I'll cut expenses elsewhere (like eating out) to pay tuition but I can't show that on Schedule J either.

Everyone says that you need to show everything but the fact is that I can't because it's too much. The truth is that my expenses need to be lower -- and they will be. The confusion comes because Schedule J is supposed to look backwark and forward at the same time.

[SinkingFast]

You don't include expenses you'll be Discharging in BK on Schedule J. No CC payments, interest, penalties, fees, etc for any debts that will be Discharged in your BK.

Many of us didn't know how much we spent for anything before prepping to file BK. We'd go to the grocery, throw what ever in the cart, charge it, and go. Without one thought to how much we'd spent. Same for gasoline. Eating out. Clothes. You name it.

The thing you may need to do is the thing many of us had to do. Quit paying the Creditors you intend to Discharge. Go to a "Cash and Carry" lifestyle.

Save all your receipts from every purchase made. Go thru the receipts every week or so and chart out where you spend your money. Gas for cars, groceries, prescriptions, etc.

Pull out your old bank statements and CC statements. Look at those to see who you paid what to. That'll give you an idea of where your money has gone in the past for car maintenance and repairs. Bigger expenses that you don't pay every day to live.

Most likely, you are right about the private school tuition. Unless you have a child who's educational needs cannot be met by the public schools in your area, you probably won't get to expense out tuition fees.

BK is about what's necessary to live. Sending your children to private school, unless there's a special educational need, is a choice.

You might be able to expense out books, supplies, school lunches, and kids' activities costs. Depends on your Court.

You can probably hide a portion of the tuition costs in other areas of Schedule J. Pad what you pay for groceries. Possibly you don't go out to eat or the movies, but you list $100/mo for Entertainment. School uniforms and some tuition costs can be incorporated into your Clothing allowance.

[Keebler]

You don't include expenses you'll be Discharging in BK on Schedule J. No CC payments, interest, penalties, fees, etc for any debts that will be Discharged in your BK.

Many of us didn't know how much we spent for anything before prepping to file BK. We'd go to the grocery, throw what ever in the cart, charge it, and go. Without one thought to how much we'd spent. Same for gasoline. Eating out. Clothes. You name it.

The thing you may need to do is the thing many of us had to do. Quit paying the Creditors you intend to Discharge. Go to a "Cash and Carry" lifestyle.

Save all your receipts from every purchase made. Go thru the receipts every week or so and chart out where you spend your money. Gas for cars, groceries, prescriptions, etc.

Pull out your old bank statements and CC statements. Look at those to see who you paid what to. That'll give you an idea of where your money has gone in the past for car maintenance and repairs. Bigger expenses that you don't pay every day to live.

Most likely, you are right about the private school tuition. Unless you have a child who's educational needs cannot be met by the public schools in your area, you probably won't get to expense out tuition fees.

BK is about what's necessary to live. Sending your children to private school, unless there's a special educational need, is a choice.

You might be able to expense out books, supplies, school lunches, and kids' activities costs. Depends on your Court.

You can probably hide a portion of the tuition costs in other areas of Schedule J. Pad what you pay for groceries. Possibly you don't go out to eat or the movies, but you list $100/mo for Entertainment. School uniforms and some tuition costs can be incorporated into your Clothing allowance.

But see, here's the problem. I know what I charged and I know pretty much where the money was spent -- it was too much! I'm willing to live on a budget and I plan to do exactly that. It's the only rational thing to do.

But the instructions for the schedules aren't asking my opinion and they aren't asking me what I think I can live on. They're asking me what happened in the past and using that to figure what will happen in the future. Now is a time for change and the mistakes of the past won't be repeated in the future. The problem is the change that will be happening and how to communicate this through the schedules.

Maybe the answer is to live on my proposed budget for the next six months so past and future all agree.

I know I'm maybe making this more complicated than it needs to be, and I am not above tampering with the figures to make everything fit. But first I need to come to grips with what's expected on those damned forms so I can be sure I can live with the answers I provide. (Or live with the punishment for failing to answer with complete honesty.)

[lrprn]

Keebler, are you trying to file pro se (without a lawyer)? One of the major advantages of having an experienced bankruptcy lawyer on your side is that they know what your bankruptcy court will tolerate around expenses and what they won't. The expenses that aren't mandated on your forms can be adjusted slightly to fit the norms in your area.

For example, let's say while you've been trying not to file bankruptcy, you have cut your spending to the absolute minimum. You haven't bought any clothes for the last year, you haven't had any medical or dental care for the last year, and you haven't done any repair work on your house. Going the literal path you are taking, you would list '0' for those expenses. But a bk lawyer will list what is 'reasonable' in your area for those expenses. The problem is that different trustees interpret what is 'reasonable' differently. That's one reason why having a lawyer to help you file is such an advantage.

Is this making any sense to you?

[SinkingFast]

You're not the only one going thru this particular situation. Others have too.

What we spent in the past, how and where we spent, things we bought, was part of the problem that brought us to BK as well.

And filing BK isn't totally about how you really live. Many areas, it's about how the Court thinks or will allow you to submit that you live. That's what we learned here. From the people posting on the Forum. And from attnys we were Consulting with.

We signed up for PACER and looked at several cases filed by attnys in our area so we'd know what to expect. What would be allowed on Schedule J.

We don't go to movies. Aren't members of any clubs. Don't have any subscriptions to magazines or newspapers. Yet, due to our family size, our attny listed $100/mo for Entertainment.

Food,......... Our Schedules Allowables for a family of 6 in our area was $1300/mo. One attny we Consulted was only gonna allow us $600/mo. Another boosted that to $700/mo. Our attny filed us at $850/mo.

Schedule J is really a combo of your actual costs to live along with a mix of costs the Court "expects" to see.

[Granny]

But see, here's the problem. I know what I charged and I know pretty much where the money was spent -- it was too much! I'm willing to live on a budget and I plan to do exactly that. It's the only rational thing to do.

Maybe the answer is to live on my proposed budget for the next six months so past and future all agree.

I know I'm maybe making this more complicated than it needs to be, and I am not above tampering with the figures to make everything fit. But first I need to come to grips with what's expected on those damned forms so I can be sure I can live with the answers I provide. (Or live with the punishment for failing to answer with complete honesty.)

I have a suggestion for you. Starting today, set your budget to live by the standards for your area. No, there are no standards for medical, it is what it is, but for the discretionary spending categories like food, clothing, gasoline, personal care, etc. you have a starting place. Decide a budget based on the standards and Sch J. Starting today, as you put items in your cart, ask yourself, do I really need this or is this a "I want" purchase. Does the car really need to go to the car wash, or can it wait?

You've got to look at every penny you spend; every purchase you make. Think of the purchase as "Is this something the court would approve".

When I did this, I was amazed at all the money I was spending without even thinking about it. I keep a perfectly balanced set of books for my house using Quickbooks, old habits are hard to break. I have recorded every purchase for the last 13 years, cash receipts and all. I could account for all but about $200 per year in ATM withdrawals. I knew where every penny went. (No, I'm not anal, it is professional training, comes with the territory.)

Now that I've had 6 months of spending wisely, I can see real declines in my spending. But the funny thing is, I have not missed spending money, I have everything I need. A lot of what I was spending was for "stuff" we really didn't need, but I thought I did at the time. I told my husband today, that I don't even want to go to Walmart to shop, it just costs too much. Sure their prices are lower, but there's more to tempt me. It's the only place in town you can get a $200 oil change.