When filing bankruptcy the US Bankruptcy Trustee assigned to your bankruptcy case will examine your income versus expenses. During the course of a Chapter 13 bankruptcy, the court allows for expenses that are considered “reasonably necessary to live”. A number of expenses are allowed to be included in this list and excludes payments to unsecured creditors.
Reasonable Expenses in Bankruptcy
Reasonable expenses in bankruptcy include the basics such as rent or mortgage payments, utilities, insurance, phone and internet charges, property taxes, pet care, union dues, employment expense, school and sports for minor children, etc. The list is pretty expansive and includes most of the common sense expenses that you spend money on over the course of a year.
- Mortgage/Rent payment, home repair, and maintenance
- Homeowner/Rental Insurance, property taxes, and “reasonable” household items
- Utilities, water, sewer, and trash services
- Internet, cell phone, and cable
- Food, Medical insurance, and Dental insurance
- Automotive, Transportation, and “reasonable” recreation, and entertainment
- Clothing, laundry, dry cleaning
- Term life insurance, health insurance, automobile insurance
- Alimony or child support payments, child care, school expenses and sports fees for children
- Self-employment and payroll taxes, business expenses, retirement contributions, employment expenses, and union dues
- Student loan payments, education expenses, and charitable contributions
- Taxes not discharged in bankruptcy
- Chapter 13 bankruptcy trustee fees
Establishing a Reasonable Expense
The best way to decide what is considered reasonable is to keep track of services and goods you buy on a regular basis such as haircuts and grooming, recreation, etc. This will help you establish a track record of spending that you can present to the courts.
As aforementioned, a bankruptcy trustee will scrutinize your expenses list as compared to your bank statements in an effort to pay back the most money for creditors. Outside of your expense is considered disposable income that will be applied to a monthly repayment plan. In fact, the trustee has an incentive to get the most back to creditors as they are often paid 10% of total payment plans.
If you need to change the amount of money you spend during your Chapter 13 repayment, you must seek the permission of the bankruptcy trustee.
Expenses Can Help You Pass The Means Test
An experience Texas bankruptcy attorney can help you lay out your historical expenses in a manner that can help push you over the threshold for Texas median income, and in turn, pass the Chapter 7 means test. The paperwork for filing bankruptcy isn’t always straightforward, however, and therefore you seek out a bankruptcy lawyer to get legal advice on how to fill out all the forms and bankruptcy schedules.