The Two Schedule J’s: How They Should Differ in Chapter 7 and 13

by Craig Andresen, Minneapolis, MN, Bankruptcy Attorney

May 29, 2008

Schedules I and J are where the bankruptcy debtor lists his or her household income, and household living expenses, in a chapter 7 or chapter 13 case. According to the instructions on the official forms, these are intended to show current and ongoing income (Schedule I), and current and ongoing expenses (Schedule J). This means these schedules are forward looking; they are not a historical record of past income and past expenses.

While listing the debtor’s income is usually straightforward, questions often arise regarding what to list for expenses. Additionally, Schedule J expenses are usually different depending on whether the case is a chapter 7 or a chapter 13. This is because Schedule J serves a different purpose in each type of case.

In a chapter 7, the debtor is usually trying to show that his or her income is completely consumed by household living expenses, and it is common for the debtor’s listed expenses to actually exceed the debtor’s income. This is because the goal is to establish that the debtor cannot afford a chapter 13. It is common for the debtor to list all sorts of expenses which may or may not be allowable, strictly speaking, on the theory that the debtor is obligated to simply report the truth about what he or she proposes to spend on various categories of expense.

On the other hand, in a chapter 13, the debtor is trying to show that he or she can afford to make a monthly chapter 13 payment consisting of a particular dollar amount. This dollar amount is then included in the chapter 13 plan, as the debtor’s monthly plan payment, which will be distributed to creditors. The creditors are notified by the court of this plan, and modifying the monthly payment amount later can be troublesome, time consuming and expensive.

This means that in a chapter 13, Schedule J must be completed carefully. Unlike in a chapter 7, the chapter 13 Schedule J should not contain excessive amounts in any category, and it should not contain items of expense which are likely to be challenged.

For example, in an “upside down” chapter 7 Schedule J (where expenses exceed income), $200 per month expense for cable TV might not be challenged, because even if this expense were reduced, the debtor still could not afford a chapter 13. However, in a chapter 13 Schedule J, a $200 per month cable TV expense is likely to draw a challenge as not being reasonably necessary for the support of the debtor or his or her dependents. In many court districts, a figure of about $90 per month might be acceptable for cable TV in a chapter 13 case, if the debtor argues that the educational and entertainment value of such an expense is reasonably necessary.

This same reasoning should be applied to other categories of expense in chapter 13 cases, to avoid being challenged on the reasonableness of expenses, which could lead to being required to modify the chapter 13 plan payment amount. With a little foresight, this unhappy prospect can be avoided.

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Craig W. Andresen is a consumer bankruptcy lawyer in Bloomington, Minnesota, with 22 years’ experience in consumer and small business bankruptcy cases. He is the Minnesota chair of the National Association of Consumer Bankruptcy Attorneys, and is a member of the Minnesota State Bar Association’s Bankruptcy Section. Mr. Andresen lectures often on the topic of consumer bankruptcy at local and national legal seminars.

Last modified: May 29, 2008