Filing for Chapter 13 bankruptcy can provide you with some relief from your debts and set you up with a repayment plan with your creditors. When you start this type of plan, you will have to stick to a strict budget for living expenses. You will have to abide by the rules for allowable expenses set forth by the court.
At the beginning of the Chapter 13 bankruptcy process, the bankruptcy trustee will look at statements from your financial institutions to determine exactly how much you spend in each category of living expenses. He will look at how much money you bring in and help you come up with a plan to make payments to your creditors. You will then be allowed to spend a certain amount of money on things like housing and food each month.
If you need to take on additional monthly expenses, you will have to clear it with your bankruptcy trustee first. This plan takes about five years to complete in most cases and you will have to answer to the trustee within that amount of time. For example, if you have to buy a car so that you can get back and forth to work, you will have to clear the monthly expense with your trustee.
Making it Work
In Chapter 13 cases, the allowable expenses may be very low. Bankruptcy trustees typically allow only a small amount of money for expenses. You might be given only a few hundred dollars to pay for food for your entire family. This can necessitate seeking help from family members or government programs. You will have to devote a large percentage of your income to paying off debt and will have to stick to the payment plan.
In a bankruptcy case, the trustee tries to set what is referred to as "reasonable" levels for expenses, and they do not base it on what you were used to in the past. If, for example, you had a very high income and high payments for everything, you may need to completely change your situation for your bankruptcy arrangements to work.