Budgeting for Chapter 13 Bankruptcy

Budget Your MoneyChapter 13 bankruptcy is not magic.  It will not fix a debtor’s financial problems overnight with no effort on their part.  The bottom line is that in order to be successful in a Chapter 13 bankruptcy case debtors needs to take a hard look at their budget and spending habits, and then take steps to take control of their budget.

I generally do not rant on my blog.  I try to inform, educate, and prepare debtors for filing bankruptcy.  If you are reading this blog and your financial problems stem from medical bills, divorce, losing a job, the death of a spouse, disability, or other unavoidable tragedies that befall good people every day, then please feel free to stop reading now and move on to the next blog post.  This article is not for you.

I am making an appeal to debtors with high-incomes and poor spending habits.  I understand how debt can get out of control.  But when the debt keeps growing and growing it is time to stop spending and make some sacrifices today for the sake of financial stability tomorrow.

After representing thousands of debtors in consumer bankruptcy cases I have found that the most difficult clients to work with are the ones with the highest income and the greatest potential for success in a Chapter 13 case.  Some of my clients with this description have a sense of entitlement.  They feel that they should be able to file bankruptcy but not give up their lifestyle, even when their lifestyle is what got them into a bind in the first place.

Chapter 13 bankruptcy cases require debtors to make payments to a trustee each month for three to five years.  High-income debtors are usually required to file plans that last five years.  These plans require debtors to pay back unsecured creditors only to the extent they can afford to do so.  Basically, if a debtor has disposable income then he will have to pay back some or all of the unsecured claims filed in his case.  (Continued)