One of the biggest changes in the new bankruptcy law has to do with the new approved budget figures now being used by the Bankruptcy Courts. Previously, when I prepared a budget for a case filing, I spoke to my client, reviewed the budget shown on his questionnaire, tweaked it to get rid of any obvious problems and filed it. As long as we were reasonable, there generally were no problems.
It does not work that way anymore. Now, the definition of what is “reasonable” comes from the IRS. These are the same IRS figures that are used in “Offer in Compromise” situations where the IRS is considering a reduction in tax debt. In other words, the IRS standards are not particularly generous.
You can review the IRS standards at the U.S. Trustee’s web site or the web site for the Clerk of Bankruptcy Court, Northern District of Georgia. You will notice that there are three different categories of approved budget figures:
– a national standard for allowable living expenses (food, clothing, personal care)
– a local standard based on the county where you live for housing and utilities
– a regional standard for transportation – Georgia is in the “south census” region
In addition the approved standards are updated approximately every 6 months, so before you file, ask your lawyer if the budget numbers are changing anytime soon.
All of these budget numbers are built into the computer program we use to prepare your bankruptcy. The issues, of couse, arise when you are spending money for “unapproved” purposes, such as paying your child’s private school tuition or college tuition, paying for a child or parent’s car, paying for a home business, etc.
The Chapter 7 and Chapter 13 trustees are filing objections based on these budget figures and are leaving it to the Judges to figure out what is a reasonable deviation.