When you file bankruptcy, the courts will ask you to submit paperwork listing your debts and your expenses. These figures will show your reasonable expenses which will vary by the debtor, state, or court.
Your reasonable expenses will be deducted from your average income over the last six months before filing bankruptcy, the remaining money will be considered disposable income to pay towards your back debt.
Reasonable Expenses
The court will consider basics such as food, clothing, mortgage or rent, property taxes, insurance, utilities, phone and internet, employment expense, union dues, school and sports for your minor children, transportation expenses, alimony, and child support payments.
IRS Deductions
Some courts will use the figures the IRS has determined to be reasonable expenses for a family your size living in your state instead of an itemized list of your expenses. The IRS uses this figure to determine how much a delinquent taxpayer can afford to pay back taxes.
Unreasonable Expenses
Generally, expenses for luxury items or services will not be considered reasonable by the courts. Driving a Mercedes-Benz or hiring an expensive dog walker could be regarded as unreasonable. The court may suggest you sell your luxury vehicle and buy a more modest one.
The US trustee’s office will have the standards you can check your expenses against. At the website, look under ‘means-testing,’ and you can see the following categories;
- National standards for allowable living expenses (for food clothing and household supplies personal care and miscellaneous)
- Local standards: housing and utilities
- Local standards: transportation expenses
If you are considering filing bankruptcy and would like help determining what your reasonable expenses are, contact a Hildago County bankruptcy attorney today.