Why Is It Important to Prepare a Personal Budget Before Filing Bankruptcy?
A personal budget is a list of what you earn in a month, and what you spend. On your income list you will show your paycheques, and any other income you receive, such as child support, pensions, unemployment insurance, and child tax credits. Common expenses will include rent or mortgage payments, groceries and food, hydro and gas for your home, and car expenses such as car payments, gas, insurance, and repairs and maintenance. It is important that you prepare a personal budget before filing bankruptcy for a number of reasons:
First, you need to know where your money goes to decide if bankruptcy is even necessary. You are considering personal bankruptcy in Canada because of your debts. Perhaps by making a personal budget and determining where you can cut expenses, you may be able to repay your debts on your own, without needing to go bankrupt.
Second, if you prepare a budget before filing bankruptcy, you might realize that you that you can afford a consumer proposal, and therefore a bankruptcy may not be necessary. In a typical consumer proposal you make one payment each month that is distributed to your creditors. Your budget will show you whether or not you can afford that kind of payment.
Finally, in a bankruptcy you are required to make a payment to your creditors based on your surplus income. The higher your earnings, the more you are required to pay. Creating a budget before you file for bankruptcy will help your trustee determine the cost of your bankruptcy in advance.
In addition, don’t forget: once the bankruptcy is over, you will need a personal budget to help you manage your money and avoid financial problems in the future.
Our Licensed Insolvency Trustees provide free initial consultations on budgeting and bankruptcy.