§ 36.16     Schedules I and J—Income and Expenditures
Cite as:    Keith M. Lundin, Lundin On Chapter 13, § 36.16, at ¶ ____, LundinOnChapter13.com (last visited __________).
[1]

Two of the three most important schedules filed by a Chapter 13 debtor are Schedules I and J to Official Bankruptcy Form 6—the schedules of current income and current expenditures. After the Bankruptcy Abuse Prevention and Consumer Protection Act of 2005 (BAPCPA),1 this spotlight is shared by Official Form B22C.2 All three of these forms address income and expenses—the fundamental components of the projected disposable income test at confirmation of a Chapter 13 plan.3

[2]

Detailed elsewhere,4 there is intense controversy whether the income and expense information on Schedules I and J or on Official Form B22C controls the entitlement of unsecured creditors at confirmation through the projected disposable income test—especially with respect to higher income debtors.

[3]

Sometimes collectively called the budget,5 the information on Schedules I and J is used to determine whether the debtor is eligible for Chapter 13,6 the information figures prominently in several of the tests for confirmation of a plan,7 and the accuracy of these schedules will be tested repeatedly in court in almost any Chapter 13 case that becomes contested.

[4]

Schedule I first requires the debtor to indicate marital status and to list dependents of the debtor and of the debtor’s spouse. Prior to December 1, 2003, Schedule I required the name, age and relationship for each dependent. The form was rewritten to reflect the Privacy Policy of the Judicial Conference of the United States8 and now requires only relationship and age—no names—for each dependent. The dependents listed on Schedule I are not necessarily coextensive with the family members or household members that may be relevant to the disposable income calculation as reconfigured by BAPCPA.9

[5]

All of the debtor’s income from whatever source and all deductions from that income must be listed in Schedule I. The schedule is arranged with separate columns for the debtor and the debtor’s spouse. The spouse column must be completed even if the spouse is not a debtor. Employment information is required, including the complete address of any employer for the debtor and the debtor’s spouse. Income must be listed as an estimate or projection of average monthly income at the time of filing the case, including wages, salary and commissions. If the debtor is not paid monthly, counsel must calculate and prorate the income as if paid monthly. A separate space is provided for the debtor to estimate monthly overtime income.

[6]

The income information on Schedule I is not the same as the “current monthly income (CMI)” that must be calculated in Part I of Official Form B22C.10 BAPCPA defined CMI with a different temporal reference,11 disconnecting the income information on Form B22C from the reality of income at the petition revealed on Schedule I. This disconnect—compelled by BAPCPA—has generated intense disagreement about the calculation of projected disposable income at confirmation.12

[7]

All deductions from income must be listed, including taxes, insurance, union dues, credit unions, garnishments, wage allotments, profit-sharing programs, pensions and the like. This information typically can be gathered from the debtor’s paycheck stub.13 After BAPCPA, the debtor is required to file all “payment advices” received within 60 days of the petition14 and much of the information on Schedule I can be garnered from those payment advices. Some of these deductions from income may be dragged back into the budget for confirmation purposes,15 but should be listed in Schedule I as deductions from current income, perhaps with an asterisk or other notation beside those deductions that will stop during the Chapter 13 case.

[8]

Schedule I requires the listing of even “irregular” income. Interest or dividends must be averaged and listed, as well as income from the operation of a business or profession. If the debtor receives alimony, maintenance or support, social security16 or other government assistance, pension or retirement income, it must be calculated and stated as a monthly amount. The statement of income should be scrupulously accurate. Overestimation will produce a plan that fails because the debtor cannot live on what is left after payments to the trustee.17 Underestimation will be interpreted as an effort to shortchange creditors and draws the debtor’s good faith into question.18 At least prior to BAPCPA,19 the debtor’s estimated average future monthly income is the boundary within which the budget and Chapter 13 plan must fit.

[9]

At the bottom of Schedule I, the drafters of Official Bankruptcy Form 6 have included this additional requirement: “Describe any increase or decrease in income to occur within the year following the filing of this document.” A similar instruction was added to Schedule I in 1991 without comment or explanation. That previous instruction seemed to relate in some way to the projected disposable income test in 11 U.S.C. § 1325(b)20 or to aid in some way in identifying “substantial abuse” of Chapter 7 under 11 U.S.C. § 707(b) (prior to amendment by BAPCPA).21 The instruction was changed in the December, 2007 version of the form to (imperfectly) reflect the BAPCPA requirement that the debtor file “a statement disclosing any reasonably anticipated increase in income or expenditures over the 12-month period following the date of the filing of the petition.”22

[10]

All Chapter 13 debtors must anticipate increases or decreases in income that are not otherwise already included in the estimate of average monthly income in Schedule I. It is not clear what the difference is between the debtor’s best estimate of average monthly income and anticipated increases or decreases in that estimated income. Especially in courts adopting the “forward-looking” reconfiguration of the projected disposable income test,23 § 1325(b)24 probably already includes consideration of anticipated increases or decreases in income and expenses. The debtor should take some care to project estimated future income on Schedule I to include anticipated increases or decreases so that the schedule will be consistent with any evidence of income the debtor would offer at a contested confirmation hearing.

[11]

Current expenditures are itemized on Schedule J to Official Bankruptcy Form 6. Unlike income information—which is twice (but differently) presented for every Chapter 13 debtor, once on Schedule I to Official Form 6 and again in Part 1 to Official Form B22C25—expense information for debtors with CMI26 less than applicable median family income27 appears only once on Schedule J to Official Form 6. For debtors with CMI greater than applicable median family income, duplicative but very different expense information will appear on Schedule J and on Official Form B22C.28

[12]

On Schedule J, every Chapter 13 debtor is required to estimate average or projected monthly expenses of the debtor and the debtor’s family, prorating any payment that is normally made on any basis other than monthly. If a spouse maintains a separate household, there is a check box with instruction that the spouse should file a separate Schedule J. The treatment of a spouse’s separate expenses is much more complicated on Official Form B22C.29The debtor must list current expenditures for rent or home mortgage, utilities, home maintenance, food, clothing, laundry, medical and dental expenses, transportation, recreation, charitable contributions, insurance, taxes, alimony or support and regular expenses for the operation of a business. Unusual expense items should be explained with parentheticals or footnotes on Schedule J. For example, if the debtor has large medical or drug expenses, the condition underlying the special needs should be revealed and explained (subject to privacy considerations).

[13]

The instructions to Schedule J say that installment payments for automobiles or other debts are not listed on Schedule J if the payments are to be included in the plan. Thus, if the debtor intends to pay for a car through payments to the Chapter 13 trustee, the installment payments on the car note are not listed on Schedule J. Although there is no similar instruction with respect to home mortgage payments, if the debtor proposes to make payments on a home mortgage through the Chapter 13 trustee, the home mortgage payment should not be listed on Schedule J. To make Schedule J more understandable and complete, the debtor might indicate with parentheticals or footnotes each item of expense that has been omitted from Schedule J because it is being dealt with by payments through the plan.

[14]

At the bottom of Schedule J, the debtor is required to “describe any increase or decrease in expenditures reasonably anticipated to occur within the year following the filing of this document”—again an (imperfect) reflection of the BAPCPA requirement that the debtor file “a statement disclosing any reasonably anticipated increase in income or expenditures over the 12-month period following the date of the filing of the petition.”30 From the average monthly income (Schedule I), the debtor subtracts average monthly expenses to reveal “monthly net income” available to fund a plan.

[15]

At confirmation, to satisfy the disposable income test in § 1325(b), it will generally be true that the debtor must commit to the plan all projected disposable income31 for the three- or five-year “applicable commitment period.”32 It would have made all good sense to design Schedules I and J to Official Bankruptcy Form 6 so that the monthly net income calculated at the end of Schedule J would be the same as projected disposable income for confirmation purposes under § 1325(b). Even before BAPCPA rewrote § 1325(b), the monthly net income calculation on Schedule J was rarely the same amount that would be determined to be projected disposable income at confirmation.33 After BAPCPA, any relationship between monthly net income on Schedule J and projected disposable income under § 1325(b) is purely coincidental and unpredictable.34

[16]

However imperfect, because Schedules I and J to Official Form 6 are the closest things we have to a “budget” in Chapter 13 cases, realism in listing income and expenditures in Schedules I and J remains fundamental to a successful Chapter 13 plan. The amounts listed for future monthly expenses in Schedule J must be accurate. If expenses are underestimated, the debtor will not have enough money to meet basic living requirements after making plan payments, and the plan will fail. If expenses are overestimated, the creditors, the trustee or the court will doubt the debtor’s intentions and challenges to confirmation are likely.

[17]

Preparing a Chapter 13 budget “backward”—starting from the amount the debtor “needs” to make the payments required by the plan—is an invitation to disaster. Counsel should insist that the debtor start with a realistic budget and determine the contribution possible to a plan from the amounts available after necessary family expenses.

[18]

Following Schedule J in Official Bankruptcy Form 6, the debtor must execute a “declaration concerning debtor’s schedules.” This declaration, under penalty of perjury, requires the debtor to declare that the schedules are true and correct. In a joint case, both the debtor and the debtor’s spouse must sign the declaration. Unlike the petition, the schedules in Official Bankruptcy Form 6 are not also signed by debtor’s counsel. A non-attorney bankruptcy petition preparer, however, must sign the declaration page, which contains the preparer’s statement of compliance with Code § 110.35

[19]

Finally, there is a statistical summary of certain liabilities, required by 28 U.S.C. § 159, to be completed by individual debtors with primarily consumer debts.36


 

1  Pub. L. No. 109-8, 119 Stat. 23 (2005).

 

2  See § 36.17  Statement of Monthly Net Income§ 36.21  Form 122C-2: Disposable Income Calculation.

 

3  See 11 U.S.C. § 1325(b), discussed in §§ 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

4  See §§ 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

5  To the eternal consternation of Chapter 13 practitioners and the courts, Official Form B22C also addresses income and expenses but, unlike Schedules I and J, Form B22C is nothing like a budget. See §§ 377.1 [ Statement of Monthly Net Income ] § 36.17  Statement of Monthly Net Income380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation, 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

6  See §§ 8.1 [ What Is Regular Income? ] § 11.1  What Is Regular Income? and 10.1 [ Debtor Must Be Able to Make Payments under a Plan ] § 13.1  Debtor Must Be Able to Make Payments under a Plan.

 

7  See, e.g., §§ 179.2 [ Accuracy of Petition, Schedules, Statement and Testimony ] § 104.3  Accuracy of Petition, Schedules, Statement and Testimony and 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

8  See §§ 34.2 [ Petition, Signed by the Debtor ] § 36.2  Petition, Signed by Debtor—“Wet” Signature Issues and 34.4 [ Statement of Social Security Number ] § 36.6  Statement of Social Security Number.

 

9  See §§ 469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3), 475.1 [ National Standards ] § 95.2  National Standards and 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

10  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

11  See 11 U.S.C. § 101(10A), discussed in § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

12  See § 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors.

 

13  See § 28.5 [ Income and Expenses ] § 30.5  Income and Expenses.

 

14  See 11 U.S.C. § 521(a)(1)(B)(iv), discussed in § 376.1 [ Payment Advices ] § 42.3  Payment Advices.

 

15  See discussion of projected disposable income test in §§ 165.1 [ Reasonably Necessary for Maintenance or Support ] § 91.3  Reasonably Necessary for Maintenance or Support and 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

16  Social security is excluded from “current monthly income.” See 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

17  See discussion of feasibility test in §§ 198.1 [ Able to Make Payments and Comply with Plan ] § 111.1  Able to Make Payments and Comply with Plan and 497.1 [ Feasibility Turned on Its Head ] § 111.2  Feasibility Turned on Its Head after BAPCPA.

 

18  See §§ 196.1 [ Income, Expenses, Lifestyle and Luxuries ] § 108.4  Income, Expenses, Lifestyle and Luxuries and 496.2 [ Good-Faith Plans after BAPCPA ] § 110.2  Good-Faith Plans after BAPCPA.

 

19  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

20  See §§ 163.1 [ In General ] § 91.1  In General168.1 [ Payment-in-Full Option ] § 91.7  Payment-in-Full Option.

 

21  See § 4.4 [ 11 U.S.C. § 707(b) Problems Are Likely ] § 8.6  11 U.S.C. § 707(b) Problems Are Likely.

 

22  11 U.S.C. § 521(a)(1)(B)(vi) (emphasis added), discussed in § 378.1 [ Statement of Anticipated Increase in Income or Expenditures ] § 36.18  Statement of Anticipated Increase in Income or Expenditures.

 

23  See § 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors.

 

24  See §§ 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income and 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

25  See §§ 379.1 [ Form B22C: Statement of Current Monthly Income ] § 36.19  Form 122C-1: Statement of Current Monthly Income and 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

26  See § 468.1 [ Current Monthly Income: The Baseline ] § 92.3  Current Monthly Income: The Baseline.

 

27  See § 469.1 [ Comparison of CMI to Applicable Median Family Income: § 1325(b)(3) ] § 92.4  Household Size and Comparison of CMI to Median Family Income: § 1325(b)(3).

 

28  See § 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation.

 

29  See §§ 380.1 [ Form B22C: Disposable Income Calculation ] § 36.21  Form 122C-2: Disposable Income Calculation and 473.1 [ Accounting for Spouses ] § 94.3  Accounting for Spouses.

 

30  11 U.S.C. § 521(a)(1)(B)(vi), discussed in § 378.1 [ Statement of Anticipated Increase in Income or Expenditures ] § 36.18  Statement of Anticipated Increase in Income or Expenditures.

 

31  See §§ 163.1 [ In General ] § 91.1  In General, 164.1 [ Projected (Disposable) Income ] § 91.2  Projected (Disposable) Income, 166.1 [ Counting the Three-Year Period ] § 91.5  Counting the Three-Year Period and 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

32  See § 493.1 [ Applicable Commitment Period Calculation ] § 100.1  Applicable Commitment Period Calculation.

 

33  See §§ 163.1 [ In General ] § 91.1  In General167.1 [ Debtor Engaged in Business ] § 91.6  Debtor Engaged in Business.

 

34  See §§ 377.1 [ Statement of Monthly Net Income ] § 36.17  Statement of Monthly Net Income379.2 [ Form B22C: Commitment Period Calculation ] § 36.20  Form 122C-1: Commitment Period Calculation and 466.1 [ In General ] § 92.1  In General494.1 [ Projected Disposable Income ] § 101.1  What Do Unsecured Creditors Get?.

 

35  See § 24.3 [ Bankruptcy Petition Preparers ] § 4.2  Bankruptcy Petition Preparers.

 

36  See 11 U.S.C. § 101(8) for definition of “consumer debt.”