Budget Analysis

Analyzing Your Budget To Determine If Bankruptcy Will Help

A final ingredient in the financial picture of a family or individual is a complete analysis of ongoing expenses and income. Only with this information in hand can the likely outcome of a bankruptcy be projected, for the family will continue to have its usual expenses, even if most or all debts are discharged, and will have to pay them with the anticipated available income. A family or individual that is considering bankruptcy must therefore put together a budget of ongoing anticipated expenses and income.

Once this is done, it may become apparent that bankruptcy by itself will do little to solve the financial problem because, even with the elimination of most or all debts, ongoing expenses still significantly exceed anticipated income. In such cases, at least part of the solution will be to pare expenses or to raise income. Cutting expenses is never easy. Families must look at such major items as housing expenses. Is cheaper housing available? Other items, such as restaurant meals, fancy automobiles, vacations, expensive clothes and other luxuries must sometimes be given up. Smaller savings can be made by conserving energy, cutting out extra phone service options, reducing or eliminating cable television bills, and cost-conscious shopping at thrift stores, garage sales and supermarkets.

The alternative, of course, is to increase income. This can sometimes be achieved by a spouse working outside the home, though these gains may be offset by expenses for child care and transportation. A lower income family may be eligible for government benefits such as food stamps, energy assistance payments or public assistance.

In any case, budget information is important for analyzing whether bankruptcy makes sense. It is also critical for determining whether a Chapter 13 case is feasible, and it is required on the schedules filed in every bankruptcy case. Creditors and the court are permitted to examine this information if they wish, though usually they do not.