Complete the Schedule J (Form B6), Current Expenditures of Individual Debtor(s), for the McPhersons. Recall that theMcPhersons are the clients of your supervising attorney, based on the fact patternwhich is set out in Problem 4.5.

You will find the form athttp://www.uscourts.gov/forms/bankruptcy-forms.

SECTION 1 The Debtor-Client PROBLEM 4.5 For the purpose of illustrating a Chapter 7 and a Chapter 13 bankruptcy, the text will follow Jennifer E. and Eric R. Mcpherson, husband and wife, as they try to untangle their financial dilemma. The McPhersons have contacted a law office and have spoken with the paralegal who works under the supervision of the bankruptcy attorney. After obtaining general informa- tion about the McPhersons, the paralegal asks the Mcphersons to submit a list of their creditors so the firm can initiate a conflict of interest check and decide whether it can take the case. The paralegal informs the Mcphersons that once the conflicts check has been completed, and if the firm has no conflict, the McPhersons will be required to complete a questionnaire concerning their assets and liabili ties. The paralegal describes the procedure that the office will follow in prepar- ing for their bankruptcy filing. Because the McPhersons are individuals who appear to be candidates for bankruptcy, the paralegal will inform them that within 180 days preceding a bankruptcy filing, they must receive an individual or group briefing from an approved nonprofit budget and credit-counseling agency that outlines the op- portunities for credit counseling and a budget analysis. The McPhersons deliver the list of their creditors to the firm, and the parale- gal conducts a conflict of interest check. Finding no conflict, the paralegal sends the McPhersons the questionnaire that they must complete for the process to go forward. The following is the McPhersons' personal history from which they will com- plete their questionnaire. Jennifer McPherson is a licensed practical nurse (LPN) who works for the Highland Medical Clinic, which is located in your city. Jennifer received her medical training at a local community college. She has worked at the clinic for the past three years. Eric McPherson is a teacher and an assistant football coach at a local high school. Eric earned his B.A. and M.A. from a state university in your state. He began working at the local high school this past fall. Prior to that time, Eric was unable to find a teaching position, so he and a friend formed Premier Painting Company. This is the second marriage for both. Jennifer previously was married to Bobby Baxter and has a four-year-old daughter, Irene Baxter, from that mar- riage. Eric has an 18-year-old son, Eric McPherson, Jr., and an eight-year-old daughter, Bethany McPherson, from his previous marriage to Sarah Jane Smith. Bethany lives with her mother, who has sole custody. Jennifer McPherson's social security number is 445-74-2787. Eric McPherson's social security number is 403-54-1277. Because both are employees, neither has an employer's identification number. The McPhersons live at 8110 South Windsor Drive in your city, county, and state. They have lived at this address since they were married two years ago. Prior to that time, Jennifer lived at 542 Evergreen Lane in your city, county, and state. She had lived at that address for one year between her previous mar- riage and her marriage to Eric. During her previous marriage to Bobby Baxter, Jennifer lived at 3120 East Avenue in your city, county, and state. Jennifer, as a salaried employee, earns $24,000 a year. Her monthly check is reduced by $500 for FICA, Medicare, and payroll taxes, and $250 for her 401(k) plan with Acme Insurance Company. She has $6,000 in her 401(k). She pays $240 a year for her state license and $300 for professional books, journals, and continuing education. Eric earns $36,000 a year at the high school as a biology teacher and assistant football coach. He is paid on a 12-month basis. His monthly check is currently reduced by $700 for FICA, Medicare, and payroll taxes; $150 for medical and dental insurance; and $150 for his state teachers' retirement plan. His retirement plan is currently worth $1,250.At times during the summer, Eric may earn up to $500 teaching at football vacations. camps. Generally, these earnings are spent on extra child care and family Prior to receiving his teaching position, Eric earned $20,000 in the year be- fore joining the high school's staff and $9,000 as a painter during the first eight months before joining the high school's staff. After receiving his teaching posi- tion and closing the painting business, Eric leased storage space from Eastside Mini Storage to store his painting equipment. The lease was for one year and costs Eric $100 a month. Eric pays his first wife, Sarah Jane Smith, $400 a month for child support for Bethany. Sarah Jane has remarried. Sarah Jane claims that Eric is in arrears in his alimony and child support by $1,000 and $400, respectively. Eric believes Sarah Jane has not given him credit for all of his past payments and he is current in both alimony and child support. The South Windsor Drive house was purchased for $80,000 and is now valued at $90,000. At the time of purchase, Eric and Jennifer paid $20,000 and took a $62,000 mortgage from First Mortgage Company at 8 percent. Their mortgage payment is $500 a month. The outstanding balance is $60,000. They are $1,575 in arrears. The mortgage payment includes homeowners insurance and real estate taxes. Because the house is aging, maintenance has increased. They owe the Jiffy Plumbing Company $600 and the Rockwell Construction Company $2,500. The house has an electric air conditioning system, and electricity has aver- aged $75 a month. The house is heated by natural gas, and the gas bill averages $100 a month. The water bill is generally about $25 a month. The telephone bill (including long distance) averages $50 a month. Neither Jennifer nor Eric has a mobile phone. Last year the McPhersons took a second mortgage from Second Mortgage Company on their South Windsor Drive house. The second mortgage was for $7,000 at 6 percent. In addition to the house, the McPhersons gave Second Mort- gage Company a security interest in all of their household furniture (valued at $5,000). They still owe Second Mortgage $6,000 and pay $125 a month. They are current in their payments but they are struggling to make the payments. The McPherson family usually spends about $1,000 a month on food. This includes about $500 in groceries and $500 for lunches and dinners at restau- rants. They also spend about $800 a month on clothing and $400 a month on entertainment. Their main source of entertainment is their Boomer bass boat that they purchased for $19,000 several years ago. It currently is worth $16,000. Last summer Eric gave his brother, Robert McPherson, a 75 HP Evinrude Motor worth $1,250. The McPhersons spend about $75 a week on laundry and dry cleaning. The remainder of their laundry is done at home. Recently, their washer broke and they purchased a Kenmore washer and dryer from Sears for $1,200, and gave Sears a purchase-money security interest in the items. The value of the washer and dryer is now $500, although they still owe $850. Payments are $32 a month at an interest rate of 21 percent. The McPhersons receive home delivery of their local newspaper, which costs $10 a month. Most medical and dental bills are covered by insurance. Although insurance covers most of the prescribed medications, the insured must pay $2 per pre- scription. All members of the family suffer from allergies and take prescribed medications for this condition. The monthly medical bills average $40, which includes the deductible. Eric carries a $500,000 term life insurance policy for which he pays $75 a month. Both Eric and Jennifer have automobiles. Eric drives a Chevrolet Blazer that is four years old. Jennifer drives a Buick Regal that is six years old. Eric's BlazerSECTION 1 The Debtor Client is financed by Auto Finance Company, He still owes Auto Finance $12,060 (at 14 percent) although the current value of the vehicle is $8,060, He makes pay. ments of $310 a month and is current in his payments, Jennifer's Buick has a current value of $3,000 with an outstanding debt of $7,000 with Capital Finance Company. The finance charge is 12 percent, She pays $170 a month. Their sure mobile insurance premiums on two vehicles total $400 per quarter. The Buick is, however, no longer in Jennifer's possession. It was repossessed by Maple Street Garage on behalf of Capital Finance a few days before Christmas because she had defaulted on her payments, Capital Finance has not yet sold the vehicle. Irene attends a private preschool program. This costs $1 800 a year in tuition. Because the preschool program is only for half a day, Jennifer has made arrange- ments for a child care center to pick up Irene at the preschool program and care for her for the remainder of the day. The child care center charges $65 a week. Eric, Jr. attends a state university. His tuition, room, and board cost $4,800 for the year. Eric, Sr. pays his son's tuition, room, and board and gives Eric, Ir. a $300 a month allowance. The McPhersons have pledged $45 a month for four years to their church for its building fund. They have not made a payment for the last three months, They also contribute $100 a month to their church. Jennifer has $3,000 in non-exempt United States Savings Bonds that have matured but have not been cashed in. They are in the family safe deposit box at First Bank. The annual rental for the safe deposit box is $60. Jennifer received $400 a month in alimony when she was divorced, but those payments have ceased since she remarried. She receives $500 a month from Bobby Baxter, her former husband, for child support for Irene. Bobby Baxter is behind in his child support payments. Last year Jennifer sued Bobby and recov ered a judgment. She has made no attempt to execute her judgment, because Bobby is unemployed and has few assets. The McPhersons have $450 in a joint checking account at Second Bank that has earned $5 interest this past year. Between the Eric and Jennifer, they have about $75 in cash. Jennifer pays a cleaning service $50 a week to clean the house. Eric pays a yard service $45 a week to mow the grass, rake the leaves, and tend to the flower gardens. Over the years, both Jennifer and Eric have overcharged on their credit cards. They owe National Bank VISA $2,500, Discover Card $25,000, and American Express $10,000. Each card issuer charges 1.5 percent interest per month on the unpaid balance. The McPhersons have not paid any of these credit cards for the last three months. Last summer Premier Painting Company procured two contracts, expecting to make $5,000 on each. Anticipating this additional income, the McPhersons took an early summer Caribbean cruise, charging $5,000 on their Discover Card. After the cruise, Eric McPherson learned that due to the economic slump, both painting jobs were cancelled and his painting company was unable to find other jobs to fill the void. Last summer the McPhersons borrowed $1,500 from Friendly Finance at an annual rate of 15 percent. Eric's father, Benjamin Franklin McPherson, cosigned for the loan. Payments are $100 a month. Friendly Finance has not been paid for four months. The outstanding balance is still $1,500. Two years ago, Jennifer borrowed $450 from her sister, Janet Tompkins. A month before last Christmas, Jennifer paid her sister the $450 she had borrowed. The McPhersons also owe back taxes from the gain they realized last year from the sale of a lake lot. They owe the Internal Revenue Service $8,000 and their state's tax commission $3,500. The final outstanding obligation is to Thrifty Credit Union. This involves a government-insured educational loan made to Jennifer while she was attending nursing school. The outstanding balance is $35,000. The interest rate isCHAPTER : Information Gathering Ambesis Counselm 12 percent a year Monthly payments are schedule at paid for the past six months. Based on this information, begin to complete the questionnaire online in CourseMate. You may download the questionnaire. As you progress though the questionnaire, you will discover that you have incomplete information. Make a list of additional information you need from the MicPhersons.The attorney informs the McPhe reons that they can expect attorney fees, ;;:'q;if;::: e:in'd court costs for filing their Chaptel'y7 or Chapter 13 bankruptcy. cas': is file dyas':cg;-'i:;tlheydirfewncc in fees and costs depending on whether the er 7oraC each type of filing. a Chapter 13 and how they would be paid under m Based on the facts in Problem 4.5 and the summary of informa- tion gathered from the McPhersons' questionnaire, are the McPhersons eligible to file a Chapter 7 petition? See 11 US.C.A. 109(b). If the McPhersons file a Chapter 7 petition, would their filing constitute presumed abuse under 11 U.5.C.A. 707(b)? Complete Official Form No- B22A (Chapter 7 Statement of Current Monthly Income and Means-Test Calculation (B22A) is found at http:/ /www.uscourts.gov/ FormsAndFees/ Forms/Bankrupt- cyForms.aspx). Are the McPhersons eligible to file a Chapter 13 petition? See 11 US.CA. 109(e). Tl}e attorney notes that a Chapter 13 filin uires that a Chapter 13 plan be sub- mitted to and confirmed by the court. Thg eqh;pter 13 plan mal;v, depeI'\\)ding on the Cha;_:)ter 13 means test, be no longer than five years. 11 US.C.A. 1322(d). During the life of the plan, the McPhersons' disposable income will be paid to the Chapter 13 trustee. 11 U.S.C.A. 1325(b)(1)(B). Therefore, under the plan the McPhersons will be on a strict budget and the difference between their income and their budget will be considered disposable income (11 U.S.C.A. 1322(b)(2)) and will be distributed by the Chapter 13 trustee to their creditors under the terms of a confirmed plan. As an initial impression, the attorney notes that to be in good faith and to have enough disposable income to fund the plan, the McPhersons will need to cut back spending. For example, they have been spending $1,000 a month on food and this will need to be trimmed to about $600. The $800 a month for clothing will need to be reduced to about $500. The $400 a month on entertainment will need to be reduced to about $150. Contributions to the church may need to be reduced or eliminated, but they can discuss this as the plan develops. Dry cleaning will need to be reduced from $300 a month to about $35. Eric, Jr. may need to take out student loans or find alter- native avenues for financing his education (his allowance will be eliminated) and Irene may need to attend public rather than the private school she now attends. The attorney also explains that the yard and cleaning services may need to be cancelled for the plan to be confirmed. The McPhersons' failure to make these concessions might prevent their plan from being confirmed due to an absence of good faith and their failure to meet the best-interests-of-creditors test. Also the McPhersons' failure to make these concessions might result in a dismissal of their case if they file under Chapter 7. 11 US.C.A. 707(b). The McPhersons agree 10 proceed with either a Chapter 7 or Chapter 13 filing and to work with the attorney in structuring a reason- able monthly budget. After this meeting, the attorney and paralegal devise a monthly budget for the vicPhersons. Based on the categories listed in Exhibit 5-2, complete a monthly budget for the McPhersons, assuming they receive a discharge under Chapter 7 from their dischargeable debts. Assume their combined monthly income will be $3,750. Reduce their monthly expenses S0 they will live within their means. What did you reduce and why? Note that taxes, alimony, and support are non- dischargeable debts and therefore will remain after their Chapter 7 discharge. Omit from their monthly expenses all payments past due. Make a separate list for payments past due. You may download Exhibit 5-2, the outline for monthly expenses, from the CourseMate for this text