Need help to reduce Disposable income

[mikpart84]

This is how my current expenses looks like. What can I increase or add to reduce the disposable income? Would I be required to produce receipts or show proof of all these expenses?

[justbroke]

Well, I can't see what they look like. The only way to truly reduce disposable income is to have secured debt which must be paid back. If you are within the UST Means Testing Allowances, the non-discretionary expenses are not normally questioned. Non-discretionary are things like rent, non-rent expense (electricity, water, trash), car ownership expense (gas, insurance, upkeep), minor entertainment, food, clothing, etc. The "disposable income" (DMI) is the discretionary portion.

So unless you have secured debt to pay (e.g., home, car) or back taxes, then you aren't going to have much wiggle room on reducing your DMI.

Generally speaking, if any one of your expenses exceed the expense category allowances (under the IRS Financial Collection Standards) then expect that the trustee will complain about that expense. For example, claiming $500 for entertainment for a single person will be well outside the IRS FCS standards. Claiming $1,500/month for food for a single person would also be way outside the IRS FCS standards. As you can see, fudging expenses will actually cause more scrutiny as the trustee will believe you're inflating expense at the expense of creditors.

While some "belt-tightening" is expected, I say that one should never skimp on categories related to health and welfare. I just paid $6.22/lb for 93% lean ground beef. I paid $3.95/lb just 3 years ago. In a Chapter 13 that would have been nearly a 60% increase in just 3 years of a 5 year plan.

Bottom line (TL/DR), if your expense exceeds the standards then you will either be outright denied and must reduce the expense, or the expense needs a justification. Few people can justify exceeding expense categories on Schedule I/J. The means test is mechanical so you can't really play around on that schedule.

[mikpart84]

Rent	$ 1,800.00
Renters Insurance	$ 20.00
Condo Maintenance	$ 30.00
Electric	$ 220.00
Cell + Internet	$ 150.00
Food and housekeeping supplies	$ 1,200.00
Childcare and children’s education costs	$ 200.00
Clothing, laundry, and dry cleanin	$ 200.00
Personal care products and services	$ 90.00
Medical and dental expenses	$ 75.00
Transportation	$ 500.00
Entertainment, clubs, recreation, newspapers, magazines, and books	$ 200.00
Charitable contributions and religious donations	$ 30.00
Insurance Vehicle	$ 375.00
Insurance Life
Car Tax	$ 200.00
Car Payment Emi	$ 1,750.00
support others	$ 300.00
Total	$7,340.00
Net Income	$ 6,716.67
	$ 1,321.67
Total	$8,038.33
Disposable	$ 698.33

[mikpart84]

Family size of 3--- CT --

Rent $1,800.00
Renters Insurance $20.00
Condo Maintenance $30.00
Electric $220.00
Cell + Internet $150.00
Food and housekeeping supplies $1,200.00
Childcare and children’s education costs $200.00
Clothing, laundry, and dry cleanin $200.00
Personal care products and services $90.00
Medical and dental expenses $75.00
Transportation $500.00
Entertainment, clubs, recreation, newspapers, magazines, and books $200.00
Charitable contributions and religious donations $30.00
Insurance Vehicle $375.00
Insurance Life
Car Tax $200.00
Car Payment Emi $1,750.00
support others $300.00
Total $7,340.00

Net Income $6,716.67
Wife-- $1,321.67
Total $8,038.33

Disposable $698.33

[justbroke]

Even if that car payment is for 2 vehicles, that is high. Maximum for two vehicles is $1,238/month (see UST Means Testing Regional Transportation Allowances).

Your car tax of $200... is that monthly? How could that be so high?

Support for others of $300/month will likely be questioned.

Also, the Means Testing is based on Gross Income less taxes and mandatory items. So you start at gross, then subtract taxes and mandatory deductions.

Without even touching any of your numbers you are probably right on the line of being over-the-median (if your gross is over $124K a year in CT). If you are over-the-median, then the UST would try to push you into a Chapter 13. If you have more than $250/month in DMI the UST is likely going to fight with you on those expenses. The biggest ones that I see at issue is the cost for a single vehicle (or two vehicles) at $1,750/month. That will be reduced "on paper" to $1,238/month. That's $500 extra in DMI alone. Your DMI is now likely over $1,100/month and we haven't even started nitpicking on support for others (another $300/month) and a car tax of $200/month?

I think your largest issue is that you don't own a home. Most people that are at or over-the-median own their home which means that they usually get to include the entire mortgage payments (along with taxes, insurance, etc) as an expense despite the amount. When you rent, you only get the maximum rental allowance for the size of the family.

Does that make sense to you?

[mikpart84]

Thank you for your response. It does makes sense... I am over the state median...
The emi for the 2 vehicles is $1750 per month... last year I paid around $1100/year for a single vehicle... this year I have 2 vehicles, so I guesstimated that amount... I should have the real figure by July 1st week...
I have some life Insurances too which I have not included in the expense list yet....
Can I increase some of the amounts in other sections or include some more items as expense?
Do i need to produce receipts for all or max of the items?

[justbroke]

You can include expenses, but to the extent that they are fluff the Trustee/UST may question the expense. Your vehicle expense alone is more than $500 over the allowance for two vehicles. I don't see a chance that you're going to get your DMI below $1,000/month. While I may not see it, a creative attorney may see a way to get that below $250-300/month. But that's going to be a lot of work and, since you are over the median, a Chapter 7 filing is going to get more scrutiny.

"Customary" expenses don't need a receipt. However, unusual or uncommon expenses will be a big red flag and will nearly always require receipts showing that this expense has been ongoing for some time. You will not be able to get around the vehicle maximum even with receipts. The Trustee is just going to say that the $500 must be paid to creditors and you have to figure out how to deal with that reduction in expense allowance.

Another area where would-be Chapter 7 debtors get caught with expenses is related to tax refunds. If you receive a tax refund, other than for earned-income tax credit (EITC) or some other refundable child credits, it will be recalculated into your monthly "net" income. For example, if you made $120K a year but claimed $30K in taxes. Your "net" income you report is $90K/year. However, if you get $10K in refunds and they are not EITC/CTC related, then the Trustee will add that back to your $90K/year. You now have an actual "net" income of $100K.

Hopefully you have started to get 3-5 free consultations to work the numbers.

[mikpart84]

https://www.bkforum.com/forum/before-the-discharge/chapter-7/1036996-chapter-7-bankruptcy-being-above-state-median-due-to-losses-from-day-trading

This was my 1st post. We are trying to file chapter 7 being above state median by skipping means test. All my debts are due to day trading losses. We are trying to declare the debts as consumer debt and show the losses as business loss. I am in conversation with an attorney, he advised to keep the budget tight, thats why I am trying to come up with something before I meet with him.

[justbroke]

Let us know how the meeting goes. I know that the attorney will come up with some solution. If you can actually do a non-consumer Chapter 7 (I did one) then you get to skip the means test. However, Schedule I/J is still done and while a Trustee may poke at your expenses, it shouldn't matter in a non-consumer Chapter 7.

The reason to keep your budget tight and to get that DMI low is to not invite any challenges. It seems like you are in good hands.

[mikpart84]

Thank you, will keep all posted. The problem is I am trying to be proactive, attorney asked me to meet around July last week. Not sure how that will go.

[mikpart84]

I had the meeting with attorney. I have received a bonus of 12K around March, so he advised me to wait for 6 months, so that i wont show up in my Income calculation. Now I have 2 questions which came to me after meeting with the attorney.
1. Can the trustee add the yearly bonus as income even though it falls below the 6 months' timeline as it is shown prominently in the paycheck?
2. Even after the 6 months I am above state median income threshold. If I take 1 month's unpaid sick leave between now and September, I will fall below the state median income. Can I file chapter 7 around October by taking 1 month's unpaid leave during August?