Schedule J, Expenses, is the last of the schedules (though it’s not the last of the forms that must be filed). Not all expenses that a debtor has each month go on Schedule J. Schedule J is for the living expenses, those expenses necessary to keep the debtor and her family housed, clothed, fed, given medical care and a few other things. Schedule J does not include debt payments except for mortgages and car payments.
How to Complete Schedule J
Part 1. Part 1 asks for information about the debtor and her household. Line 1 asks if this is a joint case. If it is not, go on to Line 2. If it is a joint case and the joint debtor lives in a different house, the joint debtor must complete a separate Schedule J. This is so that all expenses that the debtors have jointly are disclosed.
Line 2 gives information about dependents living in the debtor’s household. This information is needed so that the trustee can determine whether the expenses are reasonable or not. For example, food expense of $600 per month would be unreasonable for a single person but reasonable for a family of four.
Line 3 asks whether there are people besides dependents of the debtor living in the debtor’s household. This would include roommates. If there are others living with the debtor and the expenses listed include expenses of the others, those expenses might be disallowed unless there is some sort of offset by way of rent or contribution paid by the others that is shown on Schedule I.
Part 2 consists of Lines 4-24 and is an itemization of monthly expenses.
Line 4 is rent or mortgage payments. This is only for the debtor’s residence. Do not include rent or mortgage payments on any property other than the debtor’s residence. If the debtor has a second mortgage, list only the monthly payment of the first mortgage on Line 4. Other mortgage payments are shown on Line 5.
If real estate taxes, insurance, home maintenance or homeowners’ association dues are not included in the mortgage payment and if the debtor is responsible for any of these payments, list them on Lines 4a-4d. If the debtor is renting and doesn’t pay any or all of these expenses, do not list them.
Lines 6a-6d are for utilities. Once again, if any of the utilities are included in the rent or mortgage payment, do not list them. Utility payments that vary by the time of year, such as electricity, heat, and natural gas, should be listed based on the monthly average for the year.
Line 7 is food and housekeeping supplies. Think of this expense as what is typically spent at the supermarket every month. Sometimes, debtors combine Line 10, personal care products, with Line 7 expenses because these products are often purchased at the supermarket. Personal care services on Line 10 include barbers, hairdressers, nails, and the like.
Line 8, childcare expenses, is straightforward. The second part, children’s education expenses, is more difficult. These include things like school uniforms, lunches, and activities fees. Some of these are paid by the school semester or periodically other than monthly. Debtors should calculate how much would be allocated to these expenses each month.
The same is true for Lines 9 and 11. People don’t usually go to the doctor or buy clothes every month, so debtors must calculate how much in a year they spend on medical expenses and clothing, and then average that to get a monthly amount.
Line 12, Transportation, is not automobile payments. Line 12 is for gas and car maintenance, public transportation costs and parking fees.
Line15, Insurance, includes only those insurance payments that are not either deducted from the debtor’s pay (and therefore shown on Schedule I) or included in any payments shown on Line 4 or Line 20.
Likewise, Line 16 lists only taxes not otherwise accounted for, either as a deduction from pay on Schedule I or included in mortgage or other payments on Lines 4 or 20.
On Line 17, include only payments or leases for items that will be kept through the bankruptcy. For example, if the debtor intends to surrender a car, the car payment would not be shown on Line 17.
Line 18 is for support payments that the debtor pays. If the debtor receives support payments, those payments are shown as income on Schedule I.
Line 20 is where the debtor lists rent or mortgage payments on property other than her residence.
Line 21 is for any other regular living expense that the debtor has.
On Line 22a, show the total of Lines 4-21. Then on Line 22b show the total, if any, from Line 22 of the joint debtor’s expenses, for joint debtors who live separately. Finally, on Line 23 show the total monthly expenses.
On Line 23a list the total income from Schedule I. On Line 23b list total expenses from Line 22c of Schedule J. Lastly, on Line 23c show the difference between Lines 23a and 23b as the Net Monthly Income.
What if Line 23a is Positive?
If Schedule J shows a positive Net Monthly Income on Line 23b, it is possible that the trustee will object to the debtor filing Chapter 7 even though the Means Test says the debtor is eligible for Chapter 7. This is because of a second test called the Best Interests of Creditors Test, or BICT. If there is net income left each month, it might be in the best interests of creditors for the debtor to file Chapter 13 because there is, theoretically, money that could be paid to the creditors. The BICT is not used if the Net Income is relatively small, under $100. But debtors must be aware of the BICT and how it might affect their ability to file Chapter 7 even if the Means Test doesn’t apply.
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