Bankruptcy Means Test Limits On Private School – $137.50 Per Month
Unless you can find a private school for your child that charges only $137.50 per month, you may not be able to devote all of your disposable income to your chapter 13 plan and keep your child in private school. If you want to file a chapter 7 bankruptcy instead, you may be prevented from doing so if you have excess income that you spend on private education. The reason is the means test and expenses that are deemed by it to be reasonable and necessary. Any private school expense that exceeds $137.50 per month is unreasonable and not necessary under the means test, and the excess over $137.50 must be devoted to repayment of your creditors. §707(b)(2)(A)(ii)(IV).
The only “wiggle room” is found in the “special circumstances” exception, where you seek to persuade the court that the normal rules do not apply to you. One court found that the debtor would be permitted to spend more than $137.50 per month for each of his 5 children in parochial school, based on their religious convictions and their proven budgetary sacrifices, reasoning as follows:
“Mrs. Cleary is not a co-debtor. Her income would likely not be available if the children withdrew from private school because she would not work outside the home. It is only because of her religious convictions that she works outside the home and sends her children to private school. Debtor and his family sacrifice significantly in the purchase of food and clothing and in the areas of recreation and transportation expense. The expense of $1,513.00 for private school tuition is a reasonable and necessary expense.” In Re Cleary, 357 B. R. 369 (Bankr. D.S.C. 2006).
The detailed means test only applies to you, however, if your income is above the median. If your income is below the median for your area, you will qualify for chapter 7 bankruptcy on that basis – you more than likely will lack the income for private school anyway. For below median chapter 13 debtors, your budgetary Schedules I and J will determine how much you have to pay creditors (rather than the detailed means test formulas), but the $137.50 per month limit for private school likely will be applied to determine what is reasonable and necessary.
