Bankruptcy means test: how big families can pass
The 2005 bankruptcy law is unfair to families. If you have children, you need to fill out your bankruptcy means test budget very carefully. Here’s why.
The means test in the 2005 bankruptcy law is easy on singles, and hard on big families. Here’s an example: a household of one is allowed $300 for food. A family of four is allowed $757. That’s ten dollars a day to feed the first person in the family–$5.07 a day each for the next three. (When you go above four, it drops to $4.80.)
Congress set this up so that just trying to take care of your kids is called bankruptcy “abuse.”
There’s not much we can do about the unfairness of what the bankruptcy law allows for food and clothing. But, other things you spend money on for your children, you are allowed to claim your real cost.
Those are the areas where you need to focus when you fill in your bankruptcy means test budget.
Child care. Most families pay for child care by the week. And then multiply by four to calculate the monthly. But you should multiply by 4.333. Because there are more than twenty eight days in a month–usually thirty or thirty one. So don’t short yourself. Budgeting those extra three days could be the difference between having your bankruptcy approved and having it turned down.
Besides pre-school or after school care, budget for baby-sitting. Most families, maybe once a month, both mom and dad have to go somewhere, together, and you need a sitter. That twenty bucks or so goes in your bankruptcy means test budget, too.
Do you send the kids to summer camp? That’s child care–and goes into your child care budget.
Are the kids lagging in school? Let’s make sure we take advantage of that. (In bankruptcy everything is upside down–bad is good; good is bad.) So having trouble in school is an advantage in bankruptcy.
You are allowed to budget $125 per month to pay for schooling. Now if the kids are in full time private school, at $125 a month doesn’t begin to cover it. But if the children need tutoring to get through a tough class–or need to pay for summer school to catch up–that could be that $125 per month you are allowed in your bankruptcy budget.
(This schooling budget only covers kids up through age 17. Congress says they are on their own for college.)
Are the kids having big trouble in school? If the children are “challenged,” then the $125 per month cap doesn’t apply. Your bankruptcy budget for education for employment of physically or mentally challenged children is unlimited. (And goes past age 18, too.)
I see some parents who put their kids in private school because they couldn’t handle the public schools. In that case, you can claim that whole expense.
Health and medical. The bankruptcy means test allows you $60 per person for health and medical expenses. Most people think they spend a lot less–but actually spend a lot more.
A lot of what you think of as grocery money can actually be counted at health care. And for healthcare, unlike groceries, you can claim above the allowance.
Let’s start at Walgreens or CVS. Vitamins–that’s health care. Tylenol, allergy medication–health care. Shampoo and toothpaste goes in the grocery budget–but anything stronger is health care. Does your dentist recommend Listerine–that’s healthcare.
Lots of families are spending $20 or more per person on over-the-counter stuff that you can claim in your health care budget.
Prescriptions. Should be obvious, but don’t leave it out.
Glasses or contacts. According to the Vision Council of America, approximately 75% of adults use some sort of vision correction. I’m spending over four hundred dollars a year–thirty five dollars a month–on glasses. Your children may be spending more–because they lose or break them.
The dentist. Just routine dental check ups can cost a couple hundred dollars a year. Maybe half the people I talk to about bankruptcy tell me they are avoiding the dentist because they can’t afford what it will cost. Budget that in.
You are allowed to claim the dental work you’ve been putting off as health care.
Runny noses and broken arms. In addition to preventive care, children (and adults) catch cold and flu, break their arms, and end up at the doctor’s one way or another. Allow something for the unexpected in your bankruptcy health care budget.
Mental health. A Gallup-Healthways Well-Being Index survey conducted in 2009 revealed that about 40 million American adults had recently been diagnosed with depression.
When life knocks you down, there can be changes in the chemistry of your brain. People need help–counselling or medications or both–to get back to their right mind. Things that caused your financial problems–unemployment, break-ups, other health problems–can also bring on depression.
If depression is impacting your family, be sure to add that to your health care budget. (And be sure to take care of it, too.)
Don’t forget these categories
Charitable giving. Most people have a good handle on what they give to their church, their favorite cause, or other regular commitment.
But if you have children (or even if you don’t), you get hit for donations for Girl Scout cookies, the high school band, and that kind of thing. I’m guessing most families spend at ten dollars a month on these neighbor-to-neighbor charities.
Elderlies. Along with the family in your home, many of us are helping out parents or grandparents. One of the very few good changes in the 2005 bankruptcy law, help for elderly (or disabled) family members is now expressly ok. (This includes family overseas.)
To get your bankruptcy approved, we need to show the court where you need to spend your money. People who come to talk to me about bankruptcy have been living from paycheck to paycheck–usually for a long time. But they are often so stressed, they really don’t know where the money has been going.
I hope this article helps you think clearly about your budget–so we can get your bankruptcy approved.