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Bankruptcy Basics: Household Budget & Expenses

Bankruptcy Basics is a new feature on this blog that will discuss some of the core concepts involved in preparing for and filing a bankruptcy case. Every few weeks a new article will be posted on a new topic.

Budget can play a big role in determining if bankruptcy is a viable option to consider. It can also affect the type of bankruptcy relief a person qualifies for. Under the Bankruptcy Abuse and Consumer Protection Act of 2005 a household budget is required in any consumer bankruptcy filing. This means that all income and all expenses in the household must be considered when evaluating the available bankruptcy alternatives. A household budget is required even when a married person if filing individually. The non filing spouse's income and expenses must still be accounted for in the budget.

An experienced bankruptcy attorney will want to review the a household budget as part of their evaluation of a potential bankruptcy case. In order to prepare for this, one should review his or her monthly expenses. Some items like rent or mortgage payments, car payments and child care are the same every month and are easier to figure out. Other expenses, like utilities, food and gas can fluctuate month to month. For these types of expenses it is generally acceptable to use an average monthly amount. It is also important to remember to include expenses that are not necessarily paid every month but occur on a regular basis, such as car insurance or school fees.

Armed with this information, an experience bankruptcy attorney to more effectively evaluate the available options and it will allow an individual to make a more informed decision about their financial future.

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