The Bankruptcy Code requires the individual debtor to file a petition and a series of financial reports with the bankruptcy court. Among these reports is a statement of income identified as “Schedule J.” For many debtors, it may be the first time, or a first time in a long time, that the families’ monthly expenses have been written down and examined. Usually there are surprising discoveries while completing this schedule.
Several monthly expense items are easily determined. Fixed monthly expenses like your mortgage or rent, auto loan payments, day care, insurance premiums, and cell phone bills are easy to identify. Fixed monthly expenses are predictable and do not generally fluctuate from month to month.
Unlike fixed expenses, variable expenses change from month to month. A good example of a variable expense is an electric bill or transportation expense which may be higher during certain times of the year. It is a good idea to average variable expenses over six months or a year to obtain a more accurate estimate of this monthly expense.
Annual expenses are often overlooked. Some annual expenses are quickly ascertained, like home owner’s association dues or personal property taxes. Other expenses are much harder to estimate like out of pocket medical expenses. Again, a yearly average is recommended to find this expense.
Discretionary spending may be the most difficult category to determine. This category includes expenses like food, entertainment expenses and clothing purchases. Bankruptcy debtors often underestimate discretionary spending and the debtor should either take a critical examination of their lifestyle and spending, or keep receipts for a month to accurately estimate this category.
It is very important to accurately identify your monthly expenses on Schedule J. In a Chapter 7 the bankruptcy court may use schedules I (monthly income) and J (monthly expenses) when considering whether you have sufficient income to afford the monthly payment proposed in a reaffirmation agreement. In a Chapter 13, the debtor must show on Schedules I and J that there is sufficient income to pay creditors or the plan will not be confirmed.
Completing your bankruptcy schedules is not a mindless check-the-box process. The federal bankruptcy laws require you to accurately and completely disclose financial information to the court. Not only must you make your best effort to provide truthful information, but it is in your best interest to use these forms to paint a picture of your financial situation that will help you get the relief that you need. Carelessness and inaccuracies will cause delays and problems in your case.
If are buried in debt, consult with an experienced bankruptcy attorney and discuss how the federal bankruptcy laws can help. Your attorney will work with you to complete the bankruptcy petition and schedules carefully and accurately to get you the relief you need.