§ 95.26 — Education Expenses

Revised: March 28, 2006

[1]

For Chapter 13 debtors with current monthly income (CMI) greater than applicable median family income,1 “amounts reasonably necessary to be expended—”2 are determined in accordance with § 707(b)(2)(A) and (B).3 Among the 10 classes of expenses included in the debtor’s monthly expenses by § 707(b)(2)(A)(ii) is the following allowance for education expenses:

In addition, the debtor’s monthly expenses may include the actual expenses for each dependent child less than 18 years of age, not to exceed $1,500 per year per child, to attend a private or public elementary or secondary school if the debtor provides documentation of such expenses and a detailed explanation of why such expenses are reasonable and necessary, and why such expenses are not already accounted for in the National Standards, Local Standards, or Other Necessary Expenses referred to in subclause (I).4
[2]

This allowance for education expenses is in addition to the other nine classes of monthly expenses allowed by § 707(b)(2)(A)(ii).5 To qualify, education expenses must be “actual”—signaling that this is not an outright allowance of the sort described in § 707(b)(2)(A)(ii)(I) with respect the National Standards and Local Standards issued by the IRS.6

[3]

Actual education expenses are only available for a “dependent” child less than 18 years old. The statute is not clear whether the child must be the debtor’s dependent. An argument can be constructed that the dependent child could be a dependent of, for example, the debtor’s spouse. In a joint case, the debtor and the debtor’s spouse’s income will be fully accounted for as CMI under § 101(10A).7 It is easy to imagine a debtor’s spouse who is required to pay education expenses for a dependent child from a prior marriage. Line 43 of Official Form B22C is as good a place as any to claim those expenses, up to $1,500 per year per child. This subclause is somewhat less explicit than others with respect to who must be dependent on whom to qualify for an expense deduction.8

[4]

Also, the section does not specify the date at which the dependent child must be less than 18 years of age. The petition date is an obvious choice, but other dates could be argued. Other sentences and subclauses of § 707(b)(2)(A)(ii) are more explicit with respect to the timing of an expense calculation.9

[5]

Perhaps more significant, the statute doesn’t tell us how long the “actual expenses” have to extend to qualify as additions to the debtor’s monthly expenses for purposes of subclause (IV). For example, if the debtor has a dependent child who is 17 years old, the debtor can reasonably claim a full (school?) year of additional monthly expenses for that child’s attendance in school if the documentation and other conditions in subclause (IV) are satisfied. That monthly expense would then be fully allowed as an “amount[ ] reasonably necessary to be expended—” to determine disposable income under § 1325(b)(3), notwithstanding that the expense may end during the Chapter 13 case.

[6]

Unlike the debtor’s average monthly payments of secured debts,10 and the debtor’s expenses for payment of priority claims,11 additional monthly expenses for education of dependent children allowed by § 707(b)(2)(A)(ii)(IV) are not divided by the anticipated 60-month commitment period under the plan. Education expenses are simply a deductible amount determined in accordance with subclause (IV). This is a specific example of the more general issue that many of the “monthly expenses” allowed in § 707(b)(2)(A)(ii) are not anchored to any particular month or period of calculation.

[7]

The limitation “not to exceed $1,500 per year per child” could be read as a cap on the “debtor’s monthly expenses” earlier in the sentence. If the debtor’s allowable education expenses are lumpy but exceed $1,500 per year per child, the debtor can claim the full $125-per-month allowance.

[8]

The section addresses monthly expenses “to attend a private or public elementary or secondary school.” The expenses must be reasonable and necessary. Expenses “to attend” elementary or secondary school could include tuition, uniforms, athletic equipment, transportation expenses, room and board—the debtor need only provide documentation and a “detailed” explanation of why the expenses are reasonable and necessary.

[9]

Subclause (IV) states that the debtor must also provide a detailed explanation “why such expenses are not already accounted for in the National Standards, Local Standards or Other Necessary Expenses referred to in subclause (I).” This phrase demonstrates that Congress knew how to eliminate duplication and overlap of expenses for purposes of determining a debtor’s monthly expenses under § 707(b)(2)(A)(ii). This “not already accounted for” language does not appear in other sentences and subclauses of § 707(b)(2)(A) in which similar potential redundancies of expense deductions would have compelled a reasonable drafter of legislation to provide a similar limitation. The obvious inference is that Congress intended to prohibit “double accounting” with respect to the education expenses in clause (iv) but did not intend to prohibit possible overlaps in other places in § 707(b)(2)(A) and (B).12

[10]

There are several components of the National Standards and Local Standards and categories of Other Necessary Expenses that are included in a debtor’s monthly expenses by § 707(b)(2)(A)(ii)(I) that may overlap or be redundant of the additional education expenses described in subclause (IV). For example, the National Standards include an expense allowance for shoes and clothing for the debtor and the dependents of the debtor under § 707(b)(2)(A)(ii)(I).13 Transportation expenses are addressed in the Local Standards for Transportation.14 Among the categories of Other Necessary Expenses, “education” may overlap subclause (IV).15

[11]

It may not be simple to present a “detailed” explanation of why education expenses described in subclause (IV) are not already accounted for in an IRS standard. For example, what portion of the IRS National Standard for “food” should be allocated to a dependent child when the debtor pays separately for meals for that child to attend a private school? Is any portion of the housing and utilities expense allowance included in the IRS Local Standards allocable to a dependent child who is attending a boarding school? When the debtor’s child makes the football team and the debtor is called upon to pay $300 for a uniform, is any portion of that $300 “already accounted for” in an IRS standard?

[12]

Education expenses allowed by subclause (IV) are declared at Line 43 of Official Form B22C.16 The debtor is instructed to enter the “average monthly expenses that you actually incur, not to exceed $125 per child in providing elementary and secondary education for your dependent children less than 18 years of age.” It is not obvious why the form substitutes “in providing” for the phrase “to attend.” The instructions at Line 43 leave out altogether that “private or public” school expenses qualify for this additional monthly expense.

[13]

The statute provides no clue what “detailed” explanation is required to prove reasonableness and necessity of education expenses. Explaining the reasonableness and necessity of additional education expenses might include evidence of a child with special needs or a child with special talents, but “detailed” does not imply that “special” circumstances are required.

[14]

The statute requires “documentation” of the actual expenses but does not require documentation of why the expenses are reasonable and necessary or why the expenses are not already accounted for in an IRS standard. The instructions at Line 43 of Official Form B22C suggest without statutory support that documentation is required for all of the conditions in the subclause. Of course, documentation would not be a bad idea with respect to reasonableness, necessity and accounting for the IRS standards, but the absence of documentation is not fatal under the statute.


 

1  See 11 U.S.C. § 101(10A), discussed in § 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).

 

2  See 11 U.S.C. § 1325(b)(2) and (3), discussed in § 467.1 [ Projected Disposable Income: All Debtors ] § 92.2  Projected Disposable Income: All Debtors.

 

3  See 11 U.S.C. § 1325(b)(3), discussed in § 471.1 [ Big Picture: Too Many Issues ] § 94.1  Big Picture: Too Many Issues.

 

4  11 U.S.C. § 707(b)(2)(A)(ii)(IV).

 

5  The classes are listed in § 471.1 [ Big Picture: Too Many Issues ] § 94.1  Big Picture: Too Many Issues.

 

6  See §§ 475.1 [ National Standards ] § 95.2  National Standards and 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

7  11 U.S.C. § 101(10A), discussed in §§ 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.

 

8  See, e.g., 11 U.S.C. § 707(b)(2)(A)(ii)(II) (“the dependents of the debtor”), discussed in § 481.1 [ Elderly, Ill or Disabled ] § 95.24  Elderly, Ill or Disabled.

 

9  See, e.g., 11 U.S.C. § 707(b)(2)(A)(ii)(I) (“as in effect on the date of the order for relief”), discussed in §§ 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 11 U.S.C. § 707(b)(2)(A)(iii), discussed in § 485.1 [ Average Monthly Payments on Account of Secured Debts ] § 96.1  Average Monthly Payments on Account of Secured Debts.

 

11  See 11 U.S.C. § 707(b)(2)(A)(iv), discussed in § 486.1 [ Total Priority Debts and Divide by 60 ] § 97.1  Total Priority Debts and Divide by 60.

 

12  This issue is discussed further in § 472.1 [ Netting Issues, Including Exclusion of Payments for Debts ] § 94.2  Netting Issues, Including Exclusion of Payments for Debts.

 

13  See § 475.1 [ National Standards ] § 95.2  National Standards.

 

14  See § 476.1 [ Local Standards: Housing and Transportation ] § 95.3  Local Standards: Housing and Transportation.

 

15  See § 477.1 [ Other [Necessary] Expenses—In General; All Categories ] § 95.4  Other [Necessary] Expenses—In General; All Categories.

 

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