Continuing with our series on bankruptcy schedules, today we look at Schedule I, which is used to provide information about your income. This form provides a variety of purposes in bankruptcy cases – depending on the chapter under which the case was filed. Typically, Schedule I is analyzed in conjunction with Schedule J, which is the schedule related to a debtor's expenses. But because of the importance of each of these schedules, they will be the subject of separate blogs.
In a chapter 7 case, Schedule I helps the bankruptcy trustee determine your ability to repay your debts. In order to qualify as a chapter 7 debtor, most debtors must have income in an amount less than the mean income for similarly situated people (i.e., those with the same number of dependents) in the area in which they live. If a debtor's income is less than the mean, then there is no presumption of abuse, and that debtor can proceed under chapter 7. If a debtor has income above the mean, then a second level of analysis looks more closely at the types of debts that the debtor has, and based on that analysis, it may be found that there is no presumption of abuse despite the slightly higher income. Finally, if the debtor has above-mean income and cannot satisfy the 2nd level of analysis, then a presumption of abuse arises that the debtor has not filed chapter 7 in good faith. This is a rebuttable presumption that a debtor would have to rebut with evidence explaining to the bankruptcy court why, despite the above-mean income, that the case is not an abuse. Certain exceptions to the Means Test exist, such as a situation where the majority of the debtor's debts are considered business debts. Ultimately, if a debtor is unable to overcome the presumption of abuse, then the only bankruptcy option is to instead file for chapter 13, which involves at least some payment to the debtor's creditors.
In a Chapter 13 case, Schedule I, in conjunction with Schedule J (related to a debtor's expenses) is used to determine how much a debtor is able to pay under a chapter 13 repayment plan. Ultimately, in order to be able to confirm a chapter 13 plan, a debtor must be able to pay at least the amount of their "disposable income," as determined by schedules I and J. As a result, Schedule I takes on additional importance in a chapter 13 case.
Step 1: Gather Information About Your Income
Before you can start filling out Schedule I, you'll need to gather information about your income. This may include pay stubs, tax returns, and other documentation that shows how much money you earn. If you are self-employed, you will need to prepare financial statements. It doesn't have to be formal financial statements, but it should at least contain a listing of your revenue, along with your expenses, that reveals a net amount of income that you earn.
Step 2: List Your Income
Once you have all of the necessary information, you can start listing your income on Schedule I. For each source of income, you'll need to provide the following information:
- Type of income: This is a brief description of the source of your income (e.g. wages, rental income, self-employment income).
- Gross monthly income: This is the total amount of money you earn each month before any deductions are made.
- Deductions: This includes any pre-tax deductions, such as retirement contributions or health insurance premiums.
- Net monthly income: This is the amount of money you earn each month after deductions.
Step 3: Complete the Form
Once you've listed all of your income sources on Schedule I, you or your attorney will need to complete the rest of the form. This includes providing your name, case number, and other basic information, as well as signing the form to certify that the information you've provided is true and accurate.
Step 4: Review and File
After you've completed Schedule I, review it carefully to make sure everything is accurate and complete. Once you're satisfied with the form, you or your attorney must file it with the bankruptcy court, along with the rest of your bankruptcy paperwork.
Schedule I is an important part of the bankruptcy process. By following these steps and seeking the guidance of a bankruptcy attorney if needed, you can ensure that your income is accurately listed, and that your bankruptcy case proceeds smoothly.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.