Bankruptcy Success Commandment: Know Thy Current Monthly Expenses; FREE Expense Summary Spreadsheet

As the admonition states at the ancient Oracle of Delphi, “know thy self,” the same idea rings true as you enter the halls of the Bankruptcy system, “know thy budget.”

The most important aspect of an individuals’ bankruptcy is their budget. Your budget determines if you qualify for Chapter 7 Bankruptcy; your budget determines how much you will/can pay back in chapter 13 bankruptcy. Your budget can make the difference between whether you can wipe out your debt in 4 months with chapter 7 bankruptcy or if you must pay back a percentage of your debt in chapter 13 bankruptcy. Your budget can make the difference between whether you can save your house from foreclosure or if you will be looking for a rental in the coming months. Average attorneys simply take the numbers you give them and hope for the best. Superb attorneys work closely with you to help you identify, clarify, and understand your budget. More than anything else, your monthly budget determines the relative success of your bankruptcy.

However, it is rare that I see an individual in my office that really knows how they spend their money or where their money goes each month. When asked for expenses, I typically see a handwritten scrap of paper with about a dozen categories and rough estimates of monthly spending.

To help individuals identify spending, as a starting point, I provide this Monthly Expense Summary spreadsheet. The provided spreadsheet is a monthly summary; for those with uber Excel skills, you can add a tracking spreadsheet in which you can track spending on a day to day basis and have it automatically import the data into the summary spreadsheet (but for that file, you need to hire us).

The real challenge in bankruptcy is capturing periodic expenses and making those expenses part of a monthly budget. An easy example; you may not spend $100 per month on automobile maintenance every month, but over the course of a year, you may spend $1,200. So, a successful budget re-captures periodic expenses and amortizes those expenses as if they were monthly expenses.

For you savvy practitioners, you will notice that the main categories follow that of the IRS expense categories. Use the spread sheet to help you categorize and track your monthly expenses so you get a better understanding of your spending.

Note: This spreadsheet is merely a guide to help individuals understand and track their spending; not all categories listed are going to be allowed expenses for bankruptcy purposes. As the commandment states, “know” thy current monthly expenses. Let us worry about how to craft a budget that will achieve your bankruptcy goals.