Credit card bills, a home mortgage, car payments, and personal loans are all types of debt that can easily become overwhelming. When one debt begins to take over your finances, often others follow, making it necessary to take swift action. If you have a lot of debt and don’t know how to pay it off, bankruptcy is one viable option.
In the process of filing for bankruptcy, you need to make your case to a bankruptcy attorney by establishing your basic living expenses. This step helps to determine whether you’re eligible for bankruptcy and how much you’re able to pay back to creditors. Deciding which expenses are basic, however, can be a confusing process. Here, we’ll take a look at all it entails.
What Are Considered Basic Living Expenses?
As you go through each month, you’re going to have numerous expenses to cover. Of course, you pay your bills like electricity, water, mortgage or rent, and your car payment. However, you also spend money on things like going out to eat, going to the movies, or a coffee date with friends. And although you might spend a lot of money every month, not every item will be considered a necessity.
When you file for bankruptcy, you’ll need to explain how you spend your income. In doing so, a bankruptcy trustee will require you to list your expenses so they can determine which are necessary. Expenses that are commonly considered basic include:
- Rent or mortgage
- Utility bills
- Food
- Transportation
- Clothing
- Insurance
- Taxes
- Business expenses
- Child support payments
- Alimony payments
- Attorney fees
Listing out your expenses is a difficult process because you might believe that more of your expenses are necessary than a bankruptcy attorney does. However, it’s important to understand that a bankruptcy attorney’s job is to examine your expenses at length.
What’s the Process of Establishing a Reasonable Expense?
The reason why determining expenses is so important is because anything outside of your basic expenses is considered disposable income. In Chapter 13 bankruptcy, disposable income can be used to pay back creditors. Bankruptcy trustees have an incentive to find disposable income because they receive a percentage of what gets paid to the creditors.
When working to establish basic expenses, the bankruptcy attorney will compare your list of expenses against your bank statements to determine your true financial state. If there are certain expenses you want to be deemed as basic and necessary, you’ll need to provide evidence for the trustee.
Some examples of expenses that are difficult to prove as basic include:
- Entertainment
- Travel
- Subscriptions
The best way to make a case for yourself is to document your expenses. If you’re able to provide this kind of evidence, the bankruptcy trustee is more likely to rule in your favor.
Experienced Bankruptcy Attorneys In Louisiana
Once your basic expenses have been determined, you can only spend within those limits throughout your bankruptcy. If you want to spend above and beyond what’s been determined as basic, you must go through the process of getting it approved by the bankruptcy trustee.
When you’re going through this process, a good bankruptcy attorney can help you understand complicated methods such as the most effective way to determine expenses. They will use their experience to help you organize your expenses and make the best case for covering your basic needs.
Orum Young Law has more than 35 years helping the people of Northeastern Louisiana file for bankruptcy and regain control of their finances. In those 35 years, we have filed more than 20,000 cases and experienced unbelievable success. We help our clients understand the basic aspects of their case, including how to determine their expenses and handle any necessary filings.
Contact us today at (318) 450-3192 to schedule your free case review and start protecting your family’s future.