Thoughts about Schedule J, as it pertains to Spokane Chapter 7 Bankruptcy.

Schedule J is my favorite schedule on the Chapter 7 Bankruptcy petition. You might ask yourself why anyone has a favorite schedule; but in this post I’ll tell you exactly why I like Schedule J, and why you should like it too.

First off, the whole point of Schedule J is to figure out what the debtor’s financial life is going to look like after the petition. It is a forward-looking document, as debtors are not psychics, Schedule J is a complex estimation, which makes it the one schedule that doesn’t require perfect knowledge of everything. Because it is forward-looking, previous bank statements can’t really be relied upon too much. After all, maybe you’re about to retire, start a new job, move house, buy another car, start a new fitness routine, pay for the car repairs you’ve been putting off. See what I mean? Since you can’t prove any of this, the rules let courts reply on a standard of reasonableness, which is really just a set of cost-of-living standards issued by the IRS. Thus, if you allocate $5000 to the food budget now that you’re about to discharge all your debt and need no longer put that money towards paying creditors, then that’s going to be a huge red flag, which means the US Trustee is going to have a serious problem with you. On the other hand, if you allocate, say, an amount that exceeds the ordinary reasonableness standard by 20%, you can still argue that you have special circumstance that require you to follow a certain diet. Some examples include the vegan diet, the keto diet (especially if you’re a diabetic) and so forth. That said, the more medically/religiously necessary the expense allocation is, the more easily defensible it is when the trustee comes knocking.

Secondly, screwing up (or exaggerating) the calculations on Schedule J is a bad move. According to a U.S. Trustee I spoke to recently, bankruptcy is a forgiving process, unless you lie. Having said that, good attorneys know how to finesse Schedule J so that it accurately projects a future budget that is both reasonable and defensible. But it really does require turning over every stone, so to speak. One of the first questions I ask during a consult is how bankruptcy will change your life, because it’s more than just making debt disappear. It’s about getting a fresh start—participating in the economy again, rather than paying off creditors. So what does your fresh start look like? Well, I think your financial life is the first thing you should think about. Will you be paying for things (oil changes, cable television, chiropractic treatment, veterinary expenses) that you weren’t paying before? That’s the economic activity the law wants you to undertake, that is the whole point for having bankruptcy laws.

In Summary, Schedule J is a forward-looking estimate of post-petition expenses. Regardless of whether you’re over the median (with respect to income) in your state, Schedule J is a crucial determiner of whether you qualify for a Chapter 7 Bankruptcy. If you’re considering filing for bankruptcy in Spokane or elsewhere in the Eastern District of Washington, email me for a free Chapter 7 Bankruptcy consultation. You can also call me at 509-505-0649.