Thousands of Canadians just like you are struggling to pay bills in the face of these troubled economic times.  There are several debt solutions, including bankruptcy, available to you.  But you will never know which ones you qualify for unless you first prepare a personal budget.

There are at least four good reasons to sit down and prepare a detailed personal budget before you file for personal bankruptcy:

The First Reason 

You may not need to file.  That’s right.  Depending on what your budget tells you, you might be able to find another way out. 

Some people think of a budget as nothing more than a quick list of bills and paychecks.  Most people have little problem listing their sources of current income, but many of us have a tough time figuring out exactly where the money goes every month.

Credit cards are a major reason for this.  If we are sliding the card for everything we buy, the true cost gets buried in the monthly change and interest in the credit card minimum due amount.  We only consider that minimum as the monthly payment, without considering what we really bought or how much it really cost.  We don’t look at the detailed list of charges to see where the money is going and what could be cut.  That may be unpleasant, but if you are in financial trouble, this is an essential part of your solution.

With an accurate picture of where every dime goes every month, you might see opportunities to cut expenses to the bone and avoid filing for personal bankruptcy.

The Second Reason

One of the best kept secrets in Canada is a debt solution option called the consumer proposal.  It provides legal protection and allows you to reduce your total debt without filing bankruptcy.  To determine whether or not you qualify for this option you will need to have a detailed personal budget. 

The Third Reason

If you do end up in bankruptcy, you may have to contribute some of your monthly income towards paying back your creditors.  It depends on something called surplus income.  Generally speaking, the higher your income, the more you will pay.

For both bankruptcies and consumer proposals you’ll need to work with a licensed bankruptcy trustee.  With a detailed personal budget in hand the trustee can advise you as to exactly how much you will pay, as well as whether other options are available.

The Fourth Reason

You would be surprised at the number of people who end up declaring bankruptcy for a second and sometimes even a third time.  When you are discharged from bankruptcy you are virtually debt free.  While you still may be responsible for alimony, child support, and some student loans, you will definitely have more income at your disposal than you did while you were struggling to pay your bills. 

When those debts disappear, some people forget the lessons learned at their credit counselling sessions and wind up in exactly the same predicament once again.  A personal budget is a step you need to take to understand what debt management options are best for you as well as to ensure your financial well being in the future.