Chapter 7 Allowable Living Expenses (Guide)

Filing for Chapter 7 bankruptcy is a big step, and one of the most confusing parts is figuring out what expenses you’re actually allowed to keep.

The court doesn’t expect you to go without food, housing, or basic necessities.

But it also won’t let you keep spending like nothing’s changed. There are rules around what’s considered a “reasonable” living expense, and those rules can feel a little murky when you’re just trying to get back on your feet.

In this post, we’ll break down all the Chapter 7 allowable living expenses.

#1. Housing And Utilities

Keeping a roof over your head is obviously a must and the bankruptcy court gets that.

You’re allowed to claim reasonable rent or mortgage payments as part of your necessary expenses.

The key word here is Reasonable. If you’re living in a massive luxury home with sky-high payments, you might have to make some changes.

Your housing expenses also include things like:

• Electricity
• Water
• Gas
• Trash collection
• Basic phone service

You can even include renters or homeowners insurance. If you pay property taxes separately, those can go in too.

What you can’t do is justify a crazy-high utility bill from cranking the AC with the windows open. It has to make sense to the trustee reviewing your case.

Also Read: 341 Meeting Of Creditors Questions

#2. Food, Clothing, And Other Necessities

You’re still allowed to eat. You’re still allowed to wear clothes. And yes, you can buy toothpaste and toilet paper. All the basic day-to-day stuff you need to get through life is allowed.

There are national standards for food and clothing expenses, and they’re based on your household size.

The court doesn’t expect you to survive on beans and rice, but don’t expect them to sign off on gourmet steaks and designer shoes either.

Personal care items also fall into this category, so shampoo, soap, feminine hygiene products, and so on. Cleaning supplies for your home count too.

Just think “everyday life basics,” and you’re on the right track.

#3. Transportation

Getting around is another Chapter 7 allowable living expense.

That includes owning a car, but again, the court’s looking for reasonable here. Driving a modest, reliable vehicle? Fine. Still making $800/month payments on a tricked-out sports car? That’s gonna raise some eyebrows.

Transportation expenses can cover:

• Gas
• Car insurance
• Maintenance and repairs
• Bus passes or train tickets if you don’t have a car

The idea is that you need to be able to get to work, take your kids to school, hit the grocery store, or make it to doctor appointments. That’s all fair.

Also Read: Chapter 13 Payment Plan Example

But you just can’t claim transportation costs that are way above normal.

#4. Health Care

Health care costs can add up fast, so this is another area where the Chapter 7 court allows for some breathing room. You’re allowed to budget for:

• Health insurance premiums
• Doctor’s visits
• Dental work
• Prescriptions
• Medical supplies
• Vision care

If you or someone in your household has a chronic condition or ongoing treatment, you’ll want to document that clearly. The trustee needs to see it’s necessary and not just a one-off.

Also, if you’ve got co-pays or out-of-pocket costs your insurance doesn’t cover, those can be included too.

You just need to be able to show they’re legit.

#5. Taxes

The court isn’t going to stop you from paying your taxes.

If you’ve got tax bills that aren’t being wiped out by the bankruptcy, those are allowed as necessary expenses. That includes federal, state, and local income taxes.

Real estate taxes and self-employment taxes also fall into this category, if they apply to you.

As long as they’re legally due and you’re not just estimating, you’re good.

Keep copies of tax bills or payment plans if you have them.

#6. Court-Ordered Payments

If a judge told you to pay it, it’s allowed. That means stuff like:

• Child support
• Alimony
• Restitution
• Other court-ordered fines or payments

These aren’t optional. And the bankruptcy court knows that. So they’re considered priority expenses and won’t be questioned, as long as they’re documented and current.

If you’re behind, the trustee might ask how you plan to catch up, but the regular monthly amounts are usually allowed with no pushback.

#7. Education (Under Limited Circumstances)

You can’t just toss in private school tuition and expect it to fly. But there are some cases where education expenses get approved.

Usually, it has to be something essential like special education for a child with unique needs or job-related training for yourself that’s required to stay employed.

So no, the court isn’t going to let you claim yoga teacher training or send your kid to a $20,000-a-year prep school unless there’s a very specific reason.

If you’re trying to include this, expect to provide extra documentation and a strong explanation.

#8. Childcare

If you work and need childcare, you can include it.

This is a common and accepted expense, especially for single parents or households with two working adults. Babysitters, daycare, after-school programs – those all count.

Also Read: What Happens If Chapter 7 Is Denied?

But don’t stretch the truth. If Grandma watches your kids for free, that’s great, but you can’t claim a childcare expense just because it’s convenient.

Like everything else, this one has to be real and justifiable.

What Living Expenses Are NOT Allowed In Chapter 7?

Now let’s talk about what doesn’t make the cut. The Chapter 7 court’s main focus is on what you need to live, not what makes life more fun or fancy.

Here are a few things that are almost always rejected:

• Subscriptions like streaming services, satellite radio, monthly box clubs
• Entertainment like movie tickets, concerts, vacations, eating out
• Luxury services like housekeeping (unless medically necessary), spa treatments, gym memberships
• High-end phones and plans. The trustee might allow a basic smartphone, but not the latest model with an unlimited premium plan
• Excessive pet expenses, but basic pet care might be okay though.

In short, if it sounds like a luxury, the court will probably treat it like one.

Bottom Line

Chapter 7 isn’t a punishment. It’s about getting a clean slate while still giving you the essentials you need to function. You’ll still have a place to live. You’ll still be able to eat, get around, go to work, and take care of your health.

But it’s not the time for indulgences. The court wants to see that you’re making smart, necessary choices with your money.

Keep your lifestyle simple, focus on what you truly need, and you’ll be fine.

And if you’re ever unsure about what’s allowed, talk to a bankruptcy attorney. They’ve seen it all and can help you avoid making mistakes that could slow down or mess up your case.