Making a Budget Before Bankruptcy - Bankruptcy Trustee Ontario
Budgeting For Success Before Going Bankrupt
Personal budgeting has always been an essential part of financial planning for anyone looking to stay afloat financially.
In fact, budgeting becomes even more important in the case you are filing bankruptcy.
Filing bankruptcy in Ontario is one way to shield off those calls from your creditors and any legal action against you when you can’t pay back the debts you have accrued.
It is a tough route to take and it’s surely one you should only take once you get advised by a licensed Bankruptcy Trustee.
That said, it’s important to take some precautions before filing bankruptcy and one way to do so is through personal budgeting.
If you are wondering what budgeting has got to do with bankruptcy then we will be telling you why you ought to have in your plans.
What is a Personal Budget?
For starters, a personal budget is a simple itemized summary of your expected income and expenses in a month.
The income will capture things like your paycheques and any other cash you expect to bring your way including child support, pensions, child tax credits, some types of insurance etc.
On the other hand, your expense side will indicate things like the rent or mortgage you pay, the amount of cash spend on food, fuel, loans and pretty much every other monthly expenditure you have.
Again, a personal budget is a simple financial plan and the beauty is that you don’t need to be good in math to get your budget right.
You can use tools like excel or better even find a suitable personal budget app to help you keep everything organized.
Now that you know what a personal budget is all about, let’s take a look at some of the reasons why you should keep an eye on your own budget before filing bankruptcy.
Why You Need to Budget before Filing Bankruptcy in Ontario
Find Out if Bankruptcy is the Right Option
Legally speaking, filing bankruptcy should come as the last resort when you are struggling with debt.
This is why you ought to explore other avenues of selling your creditors before you can decide to file bankruptcy.
By crafting a nice personal budget you can take the right decision and even find out if you can tweak your expenses to help counterbalance your debts.
Remember, you only qualify for bankruptcy if:
- You have debts amounting to $1000 and above;
- Your debts are greater than the total sale value of what you own (assets);
- You can’t pay your creditors on time.
In other words, it is important to budget and seek help from a professional who will assess your situation.
You might just have a better way out of your financial struggles.
Find Out if Using a Consumer Proposal is better than Filing Bankruptcy
A consumer proposal is one way to solve your debt issues by asking a Licensed Insolvency Trustee (LIT) to put forward a payment plan to your creditors in a way that you pay a percentage of what you owe or extend the payment period.
Typical scenarios require that you make one payment every month through the LIT so long as the consumer proposal doesn’t exceed 5 years.
A consumer proposal is ideal for an individual with debts not exceeding $250,000 excluding debts like a mortgage.
Again, you can only find out if you can use a consumer proposal to settle your debts by doing a sound personal budget.
Making Surplus Income Payments
Once you have filed bankruptcy in Ontario, there are certain duties you are required to undertake including making what is known as surplus income payments.
This a payment you can make towards servicing the debts during bankruptcy.
The government has a set of rules for this i.e net monthly income surplus thresholds.
This stipulates how much and how long you will pay for the cost of bankruptcy.
With the help of a Licensed Insolvency Trustee and a budget, you can establish if you can be able to raise surplus income payments from what you earn, perhaps on a monthly basis.
Plan for the Future
Last but not least, you will need a personal budget to help you get back to your feet financially and even repair your financial score once your debts have been discharged.
Remember, there is always life after filing bankruptcy.
It is a long road to recovery but you are bound the get there in the end, albeit with lots of financial experience under your belt.
You will only avoid the financial mistakes you made by having a financial plan that reduces your debt.