If you are going to file for bankruptcy, one of the best things that you can do is to create a new budget that accurately reflects what you earn and what expenses you have. Start with those expenses that are unavoidable and happen every month, such as the rent or your payments for utilities, and then work down into the things that you can change if necessary, such as how much you spend on clothes or entertainment.
If you’re using Chapter 13 bankruptcy, a budget is a must. Chapter 13 creates a repayment plan after consolidating your debt. About three out of every 10 filings are Chapter 13. Since you have to make those monthly payments, you can work them into your budget to guarantee that you stay on track.
If you’re using Chapter 7, as roughly seven out of every 10 filings do, the budget can help you avoid resuming the activity that created the debt. Chapter 7 does wipe out that debt by liquidating your assets, but there is also a waiting period between bankruptcy filings. You do not want to quickly find yourself in debt again or there may not be any options since you cannot file for Chapter 7 again, say, the following year.
Either way, the key is to understand all of the bankruptcy options you have, how they are the same and how they are different, and how the type that you choose is going to impact the rest of your financial future. The more you know, the easier it is to plan for that future and use bankruptcy for financial success.