You can’t have a conversation about bankruptcy without a discussion about your budget. Sometimes not having a budget is the reason you are even speaking to a bankruptcy attorney. The hardest part is figuring out how much you are really spending. Then, you need to close up the holes in your budget. Underestimating how much you need is a problem. Underestimating how much you actually spend is a problem as well.
When meeting with your bankruptcy attorney, be honest. You don’t get bonus points for saying you only spend $100 per month on groceries for your family of 5. I know that’s not true and if it is true, you’re malnourished. Be realistic. This is especially important when you file a Chapter 13. If you underestimate how much you need, you will feel pinched and not have enough for your reasonable and necessary expenses.
You may hear your bankruptcy attorney discuss Schedule J with you. That is the form that contains your monthly budget that is filed with your bankruptcy whether you do a Chapter 7 or a Chapter 13. You need to supply the numbers because your budget is unique to you. How do you determine what your numbers should be?
Monthly- these are easy to figure out because they occur monthly. This would be items such as your rent, mortgage or car payment.
Weekly- This is a little trickier because you have to do the following calculation: Multiply your weekly number by 52 and then divide by 12 to get your monthly figure.
Bi-weekly- These items occur every other week. Multiply this by 26 and divide by 12 to get your monthly amount.
Quarterly- This happens every three months. Divide the number by 3 to get the monthly amount.
Annually- This happens once a year. Divide this by 12 to get your monthly amount.
The best thing to do if you are speaking with an attorney is to tell them how much you spend on each category and how often you spend that money. An experienced bankruptcy attorney will be able to accurately do these calculations for you. They will also review your bank statements to confirm.
Another thing to consider is that there are plenty of items that you forget about that add to your monthly expenses. Do you wear contacts? Do you wear glasses? Did you remember to budget for vehicle repairs? Did you budget for furnace filters? All these little items add up. Know where your money goes.
Also, there are many budget tracking programs on the computer or smart phones that can be wonderful tools in helping you get your money under control. Some tie directly to your bank account. Others ask you to enter the expenses manually. I like to use the old ledger book…but it’s probably time to go electronic.