Expenses for Dependant Student Away from Home

[SilverQT]

I’ve been scouring all over to learn more about the dependant in college considerations but haven’t run across quite my same situation. Daughter (21) away at college is a dependant on taxes and will be for 2010 and 2011. I do indeed help support her living expenses - vehicle insurance/maintenance, out of pocket medical costs, clothing, etc. This year only I did need to take out a Plus loan for this (not dischargeable, of course); she also contributes with loans and a very PT job. These are for true living expenses; the actual tuition is covered by grants. I am a little unclear about how that plays out in BK, but I would not include her out-of-house costs like rent in my detailed expenses listed. Her small income will be declared as well. This puts my gross income slightly above the median for a two person household (I am a single parent). The attorney indicated that with my high true cost of housing (first and second mortgage, taxes and insurance), and using some of the normal Fed expenses for two I qualify for BK7. I have about $55K in cc debt that I was determined to pay even if it killed me or left me destitute by retirement (I am 56 and have almost nothing saved). Then I had a car accident in November and had quite a wakeup call - I am ok but realized the pride that insisted I had to pay my debts come heck or high water was also causing depression and a sense there was nothing to live for because I would truly never have gotten out debt. I have not yet defaulted on the cc’s but before long will have no alternative – I am struggling but want to be sure I plan and understand the impact of everything. I have seen posts relating member's experience with college students still at home. Can anyone share experience with BK7 and allowable expenses (not tuition) for a dependant student who is at college away from home? (I am in the USBC Eastern District of CA.) My experienced attorney asked if she was a dependant on taxes and seemed good with that, but after reading some posts here I want to dig deeper. Like everyone I am nervous about every detail!

[HHM]

Supporting adult, dependent, kids in college is somewhat of crap shoot in BK. But don't let that deter you? I have seen that you can get away with about $0-$500 per month in living expense support; beyond that, and you start pushing your luck with the BK system. Basically, in a situation like this, the attorney should find a way to present your expenses such that even if you were not supporting your child in college, you would still qualify (easier said than done, but that is the strategy, and the success of it really depends on your specific circumstances....hence, why you cannot learn BK from a book).

[SilverQT]

Thank you! My attorney did not seem concerned and most of the actual figures I gave him to calculate the preliminary means test were indeed for me - $300 for food, $75 for my cell phone, $50 for clothing, $60 for medical, etc. I have high monthly payments for my home, which is underwater. In time I will need to let it go, but am not prepared for that for a few years. For a few expenses like auto insurance I did include the entire premium for both cars (which I need to adjust to a lower deductible). To be scrupulously honest I would think I must include her small income per month which puts me a bit over the median income threshold for two, though in doing so not allowing general living expenses for her would seem unbalanced. My actual contribution to her while away is around $600 a month, most via the Plus loan this year, some out of pocket. I didn’t consider anywhere near $600 a month when allowing for expenses relating to her for the means test.

From your suggestion to present the expenses in a way that would not count supporting my daughter in college I have what feels like a weird question… Can I file as a two person household because she is a dependant but just not claim most of her actual expenses while away from home, just the clear things like the two car insurance, out of pocket medical expense I pay for her, and then my own actual individual living expenses? (This is what I did for the means test with the attorney.) Or where you suggesting both expenses and filing status be for me alone?

[HHM]

You will have a hard time claiming a household of 2. You would certainly "try" and force the trustee to object. You (your attorney) just need to make sure you don't double dip in expense categories. You will either take a HH of 2, but won't be able to add any supplemental support, or, claim a household of 1, but then claim the "actual" expenses incurred in support. Which way you go depends on which way helps you the most. But you almost certainly get an objection (and probably lose) if you claim a household of 2, and then try to claim actual support expenses.

[SilverQT]

Most interesting... I have definitely been missing something important. Your first scenario of HH of 2 with no supplemental expenses was apparently what my attorney was intending to pursue as I know we were focused on the income relating to a household of two and we did not discuss expenses specific to my daughter. The expense figures/estimates I provided were for me alone. I am now suspecting that because I can exempt the second vehicle that she uses as it is of low value, he may have been thinking that the cost of insurance that relates to it may be a reasonable expense - irrespective of the fact that my daughter uses it. I may have been erroneously thinking that part of the vehicle insurance was an expense related to my daughter, while he may not have been connecting it to her at all. Thank you very much for your information – I will call him to be sure I am clear on this and am able to ask better questions now.

[tcreegan]

Hi SilverQT,

You use the household of 2 on the means-test.
What your daughter actually pays on a regular basis toward household expeneses is counted as income.
Whatever your daughter does NOT spend on household expenses, does NOT become household income.
Whatever you spend on your daughter are household expenses

Clear as mud? .......My work is done here!

Tom in Colo

[SilverQT]

Thank you so much – you do make sense and I think I can see through that mud! You describe what I had been thinking. All along she took out some loans and I paid about $500-600 a month out of pocket, which I could not do this year. She took on about $7K in student loans this year, I took on $7K in a Plus loan as well. A bit of that is for school costs: parking permit, books, health insurance through the school. She works PT at the University to supplement, as well as have work history. So other than the aforementioned school costs, most of this money is used for her current out of house expenses: rent, utilities, food, gas, clothes, etc. I just send her the lump sum each quarter and leave the budget in her hands. She is an uncommonly frugal person, especially for her age. The only ongoing expense I have relating to her that I will indicate on Schedule J is the maintenance and insurance on her 10-year-old Toyota (my name, owned outright). Starting in April I will be paying $86 on that parent Plus loan, which from what I read is an acceptable expense in a Chapter 7. Thus far it appears that my I & J will be close to even, but I’m still meditating on the myriad overall expenses that one never thinks about! As I go through life now once in awhile an expense realization will prompt an internal, “AHA! Never thought of THAT before!” I will post the Schedule J here soon for input to insure I have things on the right lines and have thought of everything. While I do have the attorney, I am by nature a very investigative person and want to try to eliminate any potential snags beforehand! This forum is fantastic.