When a debtor files for bankruptcy, they need to disclose details of their financial situation. This is accomplished by filing their petition and schedules with the Bankruptcy Court. Two of the most important schedules that a debtor files with their petition are Schedules I and J. These schedules document the debtor’s estimated monthly income and expenses when filing the petition which is basically a household budget. Although that may seem straight forward, a debtor’s monthly budget could have significant consequences in a bankruptcy proceeding. This article, we will look closer at those two schedules.

Schedule I – Income

Schedule I is a bankruptcy form that is a snapshot of all your household income from all sources prior to the debtor’s bankruptcy filing. Typically, it is the average monthly income during the six months prior to filing. If the debtor is married and they live with their spouse, information regarding their spouse’s income is required to be included, even if the spouse is not filing with them. If the debtor is separated from their spouse, information about their spouse’s income is not included on the schedule. If the debtor is a W2 wage earner, their gross income is listed and the taxes and other deductions from their pay stubs are subtracted to calculate their net monthly wages. If a debtor’s monthly income comes from 1099 employment or self-employment, their business expenses are subtracted from their gross income to calculate their net monthly income. All other income is then added to this figure as well, including rental income, support payments, social security, pension and other benefits. If applicable, the debtor’s spouse’s income is also added to calculate the debtor’s “combined monthly income.” 

Schedule J – Expenses

The purpose of Schedule J is to provide information regarding a debtor’s “actual and reasonably foreseeable expenses” from the point at which their bankruptcy case is filed. The schedule lists all the members of the debtor’s household and lists all of the household’s average monthly expenses. It lists all expenses that will be ongoing for the debtor. For example, rent or mortgage expenses, food and housekeeping supplies, utilities, insurance, car payments, child support and support paid to others. A debtor does not include credit card or personal loan payments or other any other payments that will be discharged by their bankruptcy. Since a non-filing spouse’s income is taken into account, their expenses are taken as well, such their monthly credit card minimum payments and other personal expenses.

Debtor’s Net Monthly Income

At the end of Schedule J, a debtor subtracts their monthly expenses from the combined monthly income to arrive at their “net monthly income.”  In a Chapter 7 bankruptcy case, this figure will typically be close to zero or a negative figure.  However, in some cases it may be a positive number, however it should not be an amount that could be used to fund a Chapter 13 repayment plan. In a Chapter 13 bankruptcy case, a debtor’s monthly income always needs to be sufficiently positive to support the payment plan. If not, the plan will not be feasible, and the case will not be confirmed.

People can spend their money any way they want but it will get scrutiny in a bankruptcy proceeding.
If a debtor’s expenses are not reasonable (e.g. expensive summer camp, excessive food expenses from dining out, excessive personal expenses etc.), the Trustee assigned to the case may seek to dismiss or potentially deny the debtor a discharge via a 707(b) motion. Alternatively, they may also try to pressure the debtor to convert their case to a chapter 13 repayment plan. Additionally, in a Chapter 13 bankruptcy case, a Trustee will scrutinize a debtor’s expenses if they file a percentage-based plan, but not if the debtor is paying 100% of their debts.

Contact The Law Offices of David I. Pankin, P.C.

If you are contemplating bankruptcy, it is imperative to speak with an experienced bankruptcy attorney. Schedules I & J are not easy to complete, and many debtors need help identifying all their sources of income and all their household expenses. At the Law Offices of David I. Pankin, P.C., we have over 25 years of experience helping debtors obtain a fresh financial start. We can be contacted at (888) 529-9600 or by using our easy online contact form.  Call us today to schedule a free consultation.

More Information:

https://www.uscourts.gov/forms/individual-debtors/schedule-i-your-income-individuals
https://www.uscourts.gov/forms/individual-debtors/schedule-j-your-expenses-individuals