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Do I Have to Live Under a Government Budget If I File Chapter 13?

Am I Required to Live Under a Government
Created Budget if I File Chapter 13

One of the most confusing and misunderstood components of the bankruptcy law has to do with the budget you submit to the bankruptcy court.  When you file a Chapter 13 case, you must submit a budget that is “reasonable.”  Our job, as your attorneys, is to work with you to create a workable budget that you can live with and that will be found acceptable by the Chapter 13 trustee and the bankruptcy judge.

The Bankruptcy Court Does Not Create a Budget for You

The bankruptcy court does not create a budget for you, nor will any judge require you to sell your house, give up your car or change your job.  At worst, the approval (confirmation) of your case will be denied and you will end up just as you were prior to filing.  As your attorneys, we will spend a great deal of time with you discussing your budget, and preparing the budget schedules that will be filed in your Chapter 13 case.  You can expect your chapter 13 trustee to look at your schedules of income and expenses and to object if the trustee believes that you are spending money unnecessarily.

If the chapter 13 trustee and/or your creditors object to your monthly spending habits, they are permitted to file an objection to the confirmation of your chapter 13 plan.  Usually, we can negotiate a compromise by adjusting your budget and reducing some of your monthly expenditures.

The bankruptcy court does look at the budget categories created by the IRS for use in tax repayment plans.  Despite what you may have been told, you are not required to adopt the IRS budget.  Instead, the IRS numbers are used as part of a “means test” analysis to determine whether you qualify for Chapter 7 or Chapter 13.   Assuming that the means test analysis shows that you have to file a Chapter 13, the “reasonableness” standard applies.

Chapter 13 Budgets Must be Reasonable

As you might imagine, however, you cannot include luxuries or extravagances in a Chapter 13 budget.  Issues that sometimes come up include private school tuition, timeshare and expenses, boat ownership and maintenance, support of a sibling or parent, and repayments of 401(k) loans.  Our job as your journeys is to spot potential problems and to advise you of the best way to proceed.  Creating a budget in a Chapter 13 is more of an art than a science, and we cannot always predict which budget entries will generate an objection.

If budget objections are filed, you can rest assured that your Clark and Washington lawyer will represent your interests zealously and we will fight for approval of a budget that is livable and reasonable in your Chapter 13 case.
Clark & Washington, Attorneys, 237 French Landing, Nashville, TN 37228 Phone: 615-831-7003



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