Deciding whether or not to file a bankruptcy is a difficult choice for many individuals and families. Sometimes, it is an obvious decision when facing a lawsuit or a foreclosure. Sometimes it is more unclear. Do I need to file? Is it necessary? If you are asking these questions, it is always a good idea to sit down and write out a budget.
If you decide to file a bankruptcy, either Chapter 7 or Chapter 13, you will need to submit a budget (on schedules "I" and "J"). This allows the Court to analyze whether you qualify. But, it is a good idea to write out a budget even if you are not sure. It is important to have a strong grasp of your finances before filing. Actually sitting down and writing down your budget will help. Seeing the numbers in front of you is a lot more effective than trying to calculate in your head.
When you look at your budget, you can sometimes catch expenses that are draining your bank account that you do not think about. It is easy to lose track of expenses, especially when they are automatically deducted from your bank account or credit card. Cable and internet bills often grow and grow. Seeing the number in pencil or ink will often really let the number settle in.
When you see the numbers in front of you, it becomes easier to determine what can be cut back, or cut out. Auto-deductions for things like gym membership, Netflix, or other online services that are not being used are easy cuts. Without a budget, you might forget about them, or other month-to-month bills. High maintenance on a car might mean you should take more public transportation, or get a better car. Large utility bills could mean you need to winterize your home. A big food expense could mean cutting back on eating out. It is easy for even frugal people to lose track of expenses.
Bankruptcy should be strongly considered when you go through a budget, cut out all of the fat, and there is still not enough money to pay credit cards, past-due payments, and other expenses. Honestly, most of my clients have already cut back on every expense before speaking to me. But, if you are not sure whether bankruptcy is an option, go through the numbers on paper. The numbers won't lie.
Chapter 13 bankruptcy can be an option when you are behind on a mortgage or a car payment. You might not be able to make a lump sum payment to cure these arrears, but spreading the payment out over 3 to 5 years might be an option. It is important to know how much you can realistically afford. A budget can help.
What is the best way to go through this information? Have a recent bank statement and credit card statement(s) ready in order to review your automatic deductions. Next, go through home expenses, such as rent, mortgage, utilities, or maintenance. Do the same for your cars, with monthly payments, gas, maintenance, and insurance. Go through your bills, such as credit cards, student loans, and bank loans. And finish up by reviewing expenses for food, activities, health care, and special expenses. Be thorough.
You might be able to balance your books. When you can't make the budget work in order to pay the bills, you should strongly consider a bankruptcy. Contact us if you would like to review you budget and expenses. We'll be happy to meet you for a free consultation.