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A comment about expense questions

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  • A comment about expense questions

    Questions about allowed or reasonablness of expenses have been coming up a lot lately in these forums. So I want to offer a few general points.

    First, the context of expenses in BK. The puproses of listing income vs. expenses is to determine if you have any disposible income to pay something back to your creditors. This aspect of BK is overseen by the US Trustee (which is different than the BK Trustee). Afterall, the chapter 7 trustee does not want your case converted to a 13 because they don't get anything, thus, its the US trustee that looks at expenses.

    When it comes to expenses, there are two questions (1), what expenses are allowed, and (2) of those that are allowed, what is a reasonable amount for those expenses. (Side note on the new law, the new bankruptcy law will take a lot of the guess work out this as the new law will use IRS tables, but that is not a good thing in that for most people what they actually spend vs what they are allowed spend according to the IRS will vary widely).

    As for what is allowed, your starting point for expenses is to figure out what your expenses "actually" are. For those that don't use personal accounting software, start with a bank statement and figure out where your money goes. Some expenses are pretty easy, rent/mortgage, utilities, insurance, etc. Others are not so easy. About all we can assist you with in this forum is help you identify lost expenses, i.e. many people forget about hygiene and grooming, recreation, etc. Plus, there is generally time between when you decide to file and actually file, start keeping track of how you spend money on a day to day basis, are you eating lunch out every day, how often do you have to go to the store for items, etc.

    The bankrutpcy court allows expenses that are "reasonably necessary to live". The phrase is very general on purpose, but allows a variety of expenses. The obvious expenses excluded from this list are payments to unsecured creditors (i.e. your credit card payments). Another big one that doesn't count., 401K loan repayments.

    As for reasonablness, this is more of a common sense question. The bankruptcy code does not require you to be destitue to file BK, but at the same time you can't be driving a Mercedes 500 SEL with a $975 per month lease payment. Second, no one on this forum can really answer that for you, there is too much regional variation. Again, take some time to figure out your expenses and list what your expenses actually are. Generally, when someone asks me if an expense is reasonable, my reply is, "is that what you actually spend". If yes, then there is not much else you can do.

    In general, an experienced attorney in your area can assist you with determining what is reasonable.
    Last edited by HHM; 04-23-2008, 10:58 PM.

  • #2
    Originally posted by HHM
    Questions about allowed or reasonablness of expenses have been coming up a lot lately in these forums. So I want to offer a few general points.

    In general, and experienced attorney in your area can assist you with determining what is reasonable.
    Ok, here comes the first one to be a thorn in your side

    I was just going over my expense sheet that my lawyer drew up for me and everything looks pretty close to par (with a little give and take in a few categories) but I got to looking at the clothing budget - and he entered $70/month for clothing. I can't for the life of me remember discussing clothing budget with him, but there it is. If I were to guess it would probably be more like $50 or so (but it's a big guess).

    I guess if you add in a suit every couple of years (which I do get) it might even out there, I dunno. Anyone know the IRS budget for clothing? I looked for it online, but wasn't able to find the page that I was looking at last week.


    • #3
      I believe this is the link you want:,00.html

      My lawyer bumped mine up also to $65 for a single person and my current income falls in the 3rd column. That was much higher than I initially listed, but he had also given me a good piece of advice in that expenses should list what I'd actually be spending without having to cut corners to try and pay the bills. That is one expense that I have kept low by just wearing what I have until it wears out so that I could pay my bills, so it would have been higher without all the CC debt or if I'd have run up my bills by buying new clothes. I do need to get some new clothes and work boots for a new job I'm starting so that expense will be going up. An old coworker would hate that IRS limit, he spends more than that just on one pair of jeans and has problems paying his bills, but everyone has different priorities.


      • #4
        Originally posted by Miyamoto
        I believe this is the link you want:,00.html
        Yeah, that's exactly what I was looking for....thank you very much, my mind is at ease!


        • #5
          My attorney determined our clothing expense to be $200 - for 3 of us. I really sweated that one too because I don't spend $200 a month for clothes at least not every month; only for birthdays, Christmas, school clothes, etc. The trustee didnt question it so I guess it was okay. I am embarrassed to say I don't even know what the allowable expense for clothing is.


          • #6
            I've seen this IRS link before and it covers expenses. Is there and actual link available that covers rents/mortgages? I know they vary from region to region too especially since my rent here in the North East is probably double of a mortgage down south. I looked and couldn't find it.

            Thanks in advance!


            • #7
              AH-HA! Now this is where I am going to confuse things. The [unofficial link removed] software has only a "few" categories in which to add these expenses, so some things had to be added together.

              When I go to that IRS link, my mom barely falls into that 3rd category for 1 person. So the standard expenses are as follows:
              food - $231
              Housekeeping & supplies - $25
              Apparel & services - $70
              Personal care products and services - $26
              Miscellaneous - $108

              So on the form7 software, there isn't a place for "housekeeping/supplies" so I put that under "Home Maintenance (repairs & upkeep)". Is that correct? She rents!

              The only other two categories I have a question with are these
              For "Food", I have $300.00
              And for "Other - (pet supls, haircuts, cosmetics, tobacco)" I have $150.00.

              So these two categories together are $450.00, and if I take the IRS food $231, personal care and expenses $26, and the miscellaneous for $108 it's $365.

              This is what she spends, we could produce receipts to show it. Most of the "other" is her stupid cigarettes! Will they say that is unnecessary expense and make her lower that expense? She buys a pack a day at $4 each.. That's $120 a month! So out of the $150 a month, that only leaves $30 a month for pet supplies/haircuts, cosmetics, which is pretty accurate because one month she'll buy pet stuff, then the next month she won't have to buy as much, but will get her hair cut for $15.

              The software also doesn't have a category for presents for holidays/birthdays/etc. Can I put that amount into the "charitable contributions" category?
              Last edited by HHM; 02-26-2010, 11:35 PM.


              • #8
                Ugh have to retype this whole post since my browser flaked out on me and I lost what I had typed.

                Here is the IRS housing/utilities guidelines, just pick your state and then find your area:

                Calculator for expenses:
                This came in handy for me since the official form didn't have as many categories and I was forgetting some of my expenses until I used that. My lawyer gave me the official form to fill out ( and after using the calculator what I did was just merge the additional expenses into whatever category best fit.

                Whittio - Since your mother can produce receipts I wouldn't be too worried about the expenses being a little higher than the IRS guidelines as long as the BK petition is filed before 10/17. Regarding the cigarettes, while it would be good for her health to quit, I don't think the trustee would disallow it from what I have read of other cases involving smokers. It might be suggested that she try to quit though as I would probably do if I were a trustee, but then again I'm biased as I've always hated it and lost my mother to cancer caused by an old coworker's secondhand smoke. Even with my feeling in regards to smoking if I were a trustee I wouldn't outright disallow as many people can't just up and quit cold turkey. My best friend took about a year I think to finally quit and I just caught him with a pack the other day even though he hadn't smoked in probably a decade. Even if she smoked generics it is still an expensive habit these days. I just looked back at my petition and it appears I may have forgot to add the gift expenses in, but you might want to throw those in other also. I'm not sure how safe it would be to include those as charitable contributions if the trustee asked for proof on those. I kept mine at $10 for that even though the ACS Relay for Life got a donation of $250 the weekend before I filed, but my sister put that on her MC so the receipt has her name and I still have to get her the money. The trustees are trying to find the fraudulent filers so as long as you are honest there hopefully won't be any problems. Good luck!


                • #9
                  YES! That official form for Schedule J is what I have here too that comes with the software. It just doesn't seem to have nearly the sections as the federal worksheet you also posted. And I don't have a clue where to put the gifts at, she doesn't spend a lot, we estimated $400 a year for birthdays/Christmas.. but that's another $33.33 per month!

                  I couldn't agree more about the smoking. The whole reason mom is in debt is pretty much directly related to smoking. She had clogged arteries in her legs from smoking. And after 3 years, 3 surgeries, and 3 years off work, she pretty much supported herself on the cards. It's so hard to get caught back up! Just her first surgery alone was something like $68,000.. although Medi-Cal paid for most of her medical bills, she just had to pay $150 for a bill that was from 2 years ago, they forgot to bill her!

                  Anyway.. I am still trying to find someone to look at these for us, and I am going to make mom file these. Knowing me, and knowing her, I'll end up having to do it too.. she just irks me to no end with her laziness! GRRRR.. I hope I am never a burden on my children like she is to me!


                  • #10
                    Like I said it appears I completely forgot to add my gift expenses in even after using that calculator, but I think Other is probably the best since the others don't seem to really fit. There is a section (#7) on the Statement of Financial Affairs for reporting gifts over a certain amount to individuals and charities, you'd think they would have included a line then on the expense listing.

                    Sounds like your mother had a similar type of health problem that old coworker of my mom had. She had to have some vein scrubbing procedure done twice thanks to her heavy smoking. When she got it done the first time she was supposed to have quit, but lied to her husband and got her fix in at another of the companies locations. She didn't want to get caught at the location she worked at by her husband walking in unexpected. I guess some people never learn, but I bet she didn't have a pleasant night when her husband learned she had been lying and had to have the procedure repeated. I'm just glad she was smart enough not to show up at my mom's funeral as she was not well liked by my family obviously. My dad and I had to hold back 2 uncles at her sister's funeral years ago when they tried to go after the alcoholic abusive husband who caused it so I'm glad we didn't have a scene at my mom's.

                    An old bill from a couple years ago was why my friend just had that pack of smokes again along with some work stress he said. The phone company just found hit him up for a couple year old bill from when he was living with his ex-fiance still. She had been disconnected so they got the phone hooked up in his name then and it appears she hadn't paid that either and just tracked him down to demand the money. I guess he forgot that was in his name when he broke it off and moved out. She could buy another horse, but not pay utilities and to think I felt guilty at first when I filed, at least I was current on everything.

                    If you haven't had any free consultations with lawyers you might want to just to get their advice on the case and expenses. I've heard other pro se filers have done that even though they had no intentions of hiring any of the lawyers. It will give you a good idea of acceptable expenses and any problems that might pop up due to specifics with her case.


                    • #11
                      Thank you so much Miyamoto(and everyone else on past threads)!! I couldn't find this Housing form anywhere. This Forum has helped me sleep better then Tylenol PM. I was afraid that my $1400.00 rent that I'm paying to rent my house would look a bit high, but my State & County have allowed me $1700. I was proposing to fund my ch13 with about $350 per month for 36 months since that's truthfully all I can afford and all of my expenses are in line with the IRS standards.

                      THANKS AGAIN!!!


                      • #12
                        Your welcome, just glad I can be of some help as I've gotten a lot of help on the various forums which have soothed my nerves. No more e-mails from the lawyer to relax. LOL I get answers faster usually by just bypassing him for most things, especially as that bit about you get abandoned after the 341 seems to be true. Good luck with your case.


                        • #13
                          Calculator for expenses ... link broken?

                          Originally posted by Miyamoto


                          Calculator for expenses:

                          This came in handy for me since the official form didn't have as many categories and I was forgetting some of my expenses until I used that. ...
                          That link is broken... anybody got one that works now?
                          I'm in N. California ... Thanks for your replies!
                          10/11/05: bought software
                          10/14/05: Filed Ch 7 BK Petition pro se skeleton
                          10/27/05: Filed all schedules, etc.
                          11/17/05: 341 meeting (done!)
                          01/16/06: Last day to file objections
                          01/18/06: Discharged, closed

                          Bankruptcy LINKS


                          • #14
                            Expenses on Disability

                            My Son just started collecting SSI Disablity the lawyer says even though it is exempt he has to account for all his expenses otherwise they take the remainder for life. Has anyone else had this problem?


                            • #15
                              Originally posted by Deborah
                              My Son just started collecting SSI Disablity the lawyer says even though it is exempt he has to account for all his expenses otherwise they take the remainder for life. Has anyone else had this problem?

                              his entire life? somehow i think something got misinterpreted there. god i hope so.

                              i think it would probably be that they can never touch any of it, but for debts to be dismissed then he is going to have to meet the income/expenses requirements and show that he doestn have extra to pay.

                              its a great question and i have no idea. i.e. what would this mean? that he could never be in a chapter 13 since they cant take that money at all, ever?
                              Im not an attorney or a trustee. You cant trust me either though!

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