How to Calculate Living Expenses for Chapter 13
Bankruptcy has quite an ominous reputation. But it should be seen as a means to an end rather than a penalty, a tool designed to help people when they're in real trouble. Chapter 13 bankruptcy, also known as a wage earner's plan, provides a stable foundation from which ordinary people can get their economic situations back under control. Calculating your living expenses will help you fill out Official Form 22C, "Statement of Current Monthly Income and Calculation of Commitment Period and Disposable Income," during the bankruptcy process.
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Things You'll Need
- Statement of monthly earnings (for you and your spouse)
- Credit card statements
- Monthly billing statements
- Paper
- Pen or pencil
- Computer spreadsheet program (optional)
Instructions
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Make a list of all living expenses you pay for on a monthly basis. Include bills, food, gas, the kids' lunch money and anything else you can think of that will go on your payment proposal for the court. Don't forget to add things you need but that you may not buy every month, such as oil changes for the car, clothes and laundry detergent.
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Rank items on your list in order from high priority to low priority. For example, your mortgage will be higher on your list than your cable TV bill, because it is more important.
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Write down the monthly cost of each living expense. If some of these costs vary from month to month, round them up to the highest costs they reach.
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Look hard at your current spending, and decide what living expenses you can cut from your list. Remember that for now, you are going to have to cut out all luxuries; if the expense is not needed to live or to get to work, it should be cut.
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Group all your living expenses into logical categories, such as "house expenses" or "car expenses." A computer spreadsheet created in Excel or a financial program, such as Microsoft Money, may be helpful, but you can also hand-write the document.
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Tips & Warnings
Take time to ensure your list of living expenses is detailed and contains absolutely everything you will need to survive, or you may not be able to maintain your budget. Don't forget the little things you will need, such as toilet paper, and an emergency fund in case your car breaks down.
The Chapter 13 filing process takes roughly three months to complete. Once your payment proposal has been confirmed in court, you will begin paying a set monthly amount (based on your budget) to a court trustee for the next three to five years.
During the Chapter 13 filing process, your creditors will not be able to ask you for money, and your house will not be foreclosed. However, once your case is confirmed, all payments must be made to the court trustee on time and in full every single month.
