<h2>New Jersey Attorney Explains The Expenses That Are Used In A New Jersey Chapter 7 Bankruptcy Case</h2>
One criteria in a New Jersey chapter 7 bankruptcy case requires the debtor’s projected net household income to be less than the projected reasonable and necessary household expenses. If the income is more than the expenses, the debtor does not meet the chapter 7 criteria. If the debtor’s monthly household income is less than the monthly expenses, there are no disposable funds to pay to the creditors. An individual debtor that files without her spouse, must include her husband’s income in the calculations, if they are residing together in the same household. If the debtor does, in fact, have disposable income, each month, the debtor must pay back, at least, the amount of the disposable income to the creditors, in a chapter 13 case. Please note a New Jersey chapter 7 bankruptcy has additional criteria.
The general list of necessary household expenses is reflected below: rent; mortgage; real estate taxes; homeowners insurance; automobiile insurance; home maintenance; utilites; electric; heat; natural gas; water; sewer; telephone; cell phone; internet; cable; housekeeping suplies; childcare; children’s educational costs; clothing; laundry; dry cleaning; personal care products and services; garbage collection; home maintenance; food; clothing; out of pocket health care and medications; dental; transportation; entertainment; alimony; support; possibly other necessary expenses; homeowners association; health Insurance; other insurance; car payments; possibly other installment payments; recreation; charitable contributions; renters insurance; life Insurance; payments for additional dependants.
The amount that is allowable for each expense is based on the following: number of household members: each individual’s personal situation; the bankruptcy code; the amount the trustee considers reasonable; the amount the presiding judge deems reasonable; IRS standards. The IRS provides a general guideline of the acceptable allowable amounts that are deemed reasonable for each expense. However, the amount may be increased based on the particular needs of each individual. For example, a household member that has diabetes, may require certain foods, that are more costly. A person that drives 100 miles one way to work each day, will incur more transportation costs than a person who works one block from their employment. Also, the number of household members effects the amount that will be considered reasonable, such as food, etc. Also, the allowable monthly payments for certain expenses, such as entertainment, are typically standard for each trustee.
Allowable expenses do not include any payments to unsecured creditors, such as credit card debt and personal loan payments. This criteria seems to frustrate some clients. However, such expenses are not included because the unsecured debt will be eliminated if the debt is discharged. The court and trustee want to know how much disposable income will be available after their unsecured debt is discharged. In the event that the debtor has disposable income that may be paid to the creditors each month, the debtor does not meet the New Jersey chapter 7 criteria. In this scenario, the debtor will be required to pay the amount of the disposable income to the creditors, in a chapter 13 case.
The amount of the non filing spouse’s income may be reduced by the amount that such spouse pays each month to towards their credit cards and unsecured debt. The court allows for a deduction in this scenario because the non filing spouse’s debt will not be eliminated by the filing spouse’s bankruptcy filing. Also, such payments will reduce the amount that this spouse is able to contribute to the household.
A debtor cannot use funds for an expense that is frivolous and unnecessary. For example, a debtor cannot use a mortgage expense on a second beach house that is not earning the debtor any money. However, if the beach house results in a positive net cash flow, each month, the debtor may use the mortgage payment as an expense. A debtor could not use an auto payment on his Harley Davidson, that is not necessary for transportation to and from work. However, if the debtor requires the motorcycle for work purposes, the trustee will likely permit the payment.
Contact Manchel New Jersey Bankruptcy Law at 866 503 5644 to schedule an appointment.