Recently we received a question from one of our VBAs (Virtual Bankruptcy Assistants) about reporting the rental income and mortgage debt of a client and which schedule to report them in. The scenario goes as follows:
The debtor owns property that he is renting out to his son. The mortgage is $2000 and the son’s rent amounts to $2000. At first glance, it would seem that they would cancel each other out. So does it need to be reported? If id does, which schedule should it be reported in? How about reporting it in the Means Test?
The answer is yes – the income and the debt does need to be reported, even if it seems that they cancel each other out.
- The mortgage debt would be reported on Schedule D.
- The mortgage payment would be reported on Schedule J (line 1).
- The $2,000 monthly income from the son would be reported on Schedule I (line 8).
- The $2,000 monthly income from the son would also be reported on the Means Test with other income (If you are using Best Case, use the “Edit CMI Details” button to enter all sources of income separately, and let the software do the rest of the work for you).
- If the debtor has made the monthly payments for the last 90 days, this will also need to be reported on the Statement of Financial Affairs (SOFA) (line 3).
It is important to report all income and debt when filling out the schedules and the Means Test. If you have any questions, feel free to contact us.