Rental Allowance in a Chapter 13 Bankruptcy

Bankruptcy Filings...

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A Personal Bankruptcy Story.

This personal bankruptcy question was asked on a bankruptcy forum website in 2011, “We are a family of 10, and with possibly surrendering our house in a Chapter 13 bankruptcy, where do we find rental allowance?”

The Purpose of Using IRS Census Data.

Chapter 13 bankruptcy filers fill out Form 22C to provide the bankruptcy court with a statement of current monthly income and calculations for their plan of a commitment period for their disposable monthly income. When it comes to rental expenses, the United States Bankruptcy Court must use the Census Bureau, IRS Data and Administrative Expenses Multipliers as the sole source for determining what filers are allowed for such expenses in determining their plan on the form.

Cases filed after November 11, 2011 must use the state by state, and county by county figures for the family size listed in determining which expense is for rental allowance. These figures are found in Census Bureau Data shown as:

Section II. IRS Data & General Information for Completing Bankruptcy Forms

          4. Local Standards. Housing and Utilities and Transportation

               a. Housing and Utilities Standards are derived from Census and BLS data, and are provided by state down to the county level. The standard for a particular county and family size includes both housing and utilities allowed for a taxpayer’s primary place of residence.

Housing and Utilities standards include mortgage or rent, property taxes, interest, insurance, maintenance, repairs, gas, electric, water, heating oil, garbage collection, telephone, cell phone, internet, and cable. The tables include five categories for one, two, three, four, and five or more persons in a household.”

The Purpose of the Means Test.

The Means Test is used to determine whether or not a person qualifies to file a Chapter 7 bankruptcy, but in a Chapter 13 bankruptcy, the Means Test can be used to determine how many years the filers plan must be approved, for up to 5 years.

Problems Can Arise.

A problem can arise in filing a form 22 C when a Chapter 13 bankruptcy filer has 5 or more family members who will be living in a rental house. The amount allowed is the same for 5 family members as it is for 10 family members. The debtor asking the illustrated question above revealed in his blog that he wondered how his family could live on the amount allowed in the Census Bureau data when his family is twice as large as a family of 5 that is provided for in a rental allowance.

Need for a Bankruptcy Lawyer.

Bankruptcy laws are not always written for every conceivable circumstance that can arise. That is why you might need a bankruptcy lawyer to help you with such circumstances should they arise in your case. Means tests, themselves, are complicated. You may need help for calculating the means test if you are over the median income for the area of the nation in which you live.

We can help you find a bankruptcy attorney in your area that can help answer any questions you have about a Means Test, a rental allowance, bankruptcy forms, or any other type of bankruptcy questions you have.

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