Expenses, as distinct from “debts,” are those recurring costs that are necessary on a continual basis, such as rent, utilities food etc. Debts are sometimes also necessary expenses, such as car payments, because they are capitalizing our need to transport ourselves to get to work and the grocery store, and so that is one “debt” that shows up as an expense.

In bankruptcy, we use a form called “Schedule J” to establish your monthly expenses. An Excel spreadsheet detailing those expenses is available for download at the end of this page. One column has all the categories of expenses allowed in bankruptcy cases, and the right are $0.01 placeholders that you can replace with the actual amounts you expend monthly in each of these categories. It tallies the monthly total automatically.

Each of these expenses needs to be “reasonable and necessary” so if you’re spending, for example, $450 per month on a cell phone account or $200 on cable television that will probably be deemed excessive. However, if you have a large mortgage payment, that is not usually deemed excessive for bankruptcy purposes. Secured debt for homes is usually unchallenged by the UST even if it is over 50% of your net income and likely unsustainable in the long run.

If your income is considerably more than your expenses then the UST might see that as an ability to repay your creditors. This may be the case even if it is because you’ve temporarily moved back in with the folks to save money. However, this is usually not the case at all. Most of my clients have gone into debt because their employment or business income was not sufficient to meet expenses, and debt was taken on to leverage income.

You Get to Spend Your Money to Live a Regular Modern Lifestyle

No one expects you to live the life of a pauper, or throw you back to the pre-digital age. You can have cell phones, cable TV, broadband internet access and other modern necessities. You are allowed to live your life without any major upheavals to get through the bankruptcy process.

However, it is not unusual for you to choose to make major changes in your income or expenses after bankruptcy as you’ll be on a cash basis and will want to have savings. If you consider savings as an expense, just like you used to consider credit card payments a necessary expense, then you’d be surprised how much you can save in a short time period.