How to Complete Bankruptcy Schedule J: Your Expenses

Filing for bankruptcy requires disclosing all aspects of your finances on bankruptcy forms, including your income, expenses, debts, assets, and property transactions. You’ll disclose your current household budget on Schedule J: Your Expenses.

Completing Schedule J: Your Expenses

This form includes easy-to-understand instructions, so listing your household's current monthly expenses is relatively simple—especially if you follow these tips:

• You can determine the monthly cost of occasional expenditures like car repairs or snow removal by dividing your yearly expenses by 12.
• If you have an expense not listed on the form, you can enter it in the “Other” section.
• On the Expenses for Separate Household of Debtor 2 form, you’ll list the expenses of a spouse living in a separate residence.

Don't try to inflate your budget by incurring new expenses shortly before bankruptcy. Also, you’re expected to explain any anticipated expense increase or decrease at the end of the form. For instance, you’d notate a rent change if your lease would be up shortly, and you’d pay a different amount at your new home.

The Purpose of Schedule J: Your Expenses

The court and bankruptcy trustee—the individual appointed to oversee your case—use Schedule J: Your Expenses to determine several things, including whether you’re paying creditors enough and can afford to make proposed payments. These issues arise in Chapters 7 and 13 in similar but different ways.

Expenses Too High

Your expenses must be reasonable. You should be prepared to answer the trustee's questions about unusually high costs and provide receipts proving you actually incurred them. Also, if the expense isn't typical, expect the trustee to consider how long you've paid it. For instance, a trustee might object to hefty church donations if you can't show a history of regular contributions.

A Chapter 7 trustee who finds you’ve overblown your expenses will likely ask the bankruptcy court to convert the Chapter 7 case to Chapter 13 so the funds can be used to pay creditors. The Chapter 13 trustee would argue that you should increase monthly Chapter 13 payments to creditors.

Disposable Income Available

Trustees compare Schedule J: Your Expenses to Schedule I: Your Income to determine whether you're paying creditors as much as your budget allows. If the comparison reveals that you have disposable income—money left over after paying expenses—the Chapter 7 trustee will ask the court to declare you ineligible for Chapter 7 bankruptcy and convert your case to Chapter 13.

This outcome is possible even after passing the Chapter 7 bankruptcy means test. The means test evaluates past disposable income, whereas this test considers your current budget.

A Chapter 13 trustee who finds additional disposable income would argue that you should pay more to creditors throughout your plan. Find out how to determine whether you'd pay into a three- or five-year plan.

Ability to Pay

In Chapter 7, the court will use Schedule J to evaluate your ability to pay a “reaffirmation agreement.” A reaffirmation agreement creates a new contract between a debtor and a creditor. It is used primarily for auto loans when the filer wants to keep a car. However, it can be used for other “secured” debts when the filer wants to keep the collateral.

In Chapter 13, you must be able to pay monthly Chapter 13 plan payments. The court will use this form and others to check your financial ability before approving or “confirming” the Chapter 13 plan. Find out what happens when the trustee objects to a Chapter 13 plan.

Where to Get Schedule J: Your Expenses

You can find a downloadable version of Schedule J: Your Expenses and other official bankruptcy forms on the U.S. Court’s website.

Consult a Bankruptcy Lawyer

Bankruptcy is a specialized legal area that requires an understanding of how multiple issues interrelate. Although the form instructions are clear, you’re responsible for understanding the law and how it will impact your bankruptcy case.

If you aren’t familiar with the process, it's best to consult an experienced bankruptcy attorney or use a do-it-yourself book like Nolo's How to File for Chapter 7 Bankruptcy by Attorney Cara O’Neill.