Determining your ability to pay your debt

The first step in dealing with a debt crisis is to determine your ability to pay your unsecured debts. It is important to take this step before examining the various options for dealing with your debt. The process of reviewing your monthly income and expenses will provide you with information that is essential in determining which options are viable.

To determine your ability to service or pay your debts, we recommend that you download and complete our Income and Expense form, which is essentially a monthly budget. Here are some simple guidelines for completing the form:

• Consider both your present and expected future lifestyle.

• If you have expenses that are not listed, just add them to the list.

• Be realistic and reasonable when determining your expenses, record all ongoing expenses -food, rent, average car repair, hair cuts, entertainment, and so on. ask yourself if the expenses are needs or wants.

• Do not record payments to creditors unless they are payments to secured creditors (such as car payments, mortgages or other leases).

• You may wish to prepare multiple budget scenarios depending on the changes that can be reasonably made to your lifestyle (for example, rent versus mortgage payments)

The net amount (total net income less total expenses) represents your estimated ability to pay. If the net is a negative number, we suggest that you review your expenses to ensure that they are both supportable and reasonable. A negative result indicates that you are likely living beyond your means. If this is the case, you may wish to contact us for a free initial consultation concerning how to deal with your debt. 

If you have some ability to pay your debts, you should now record and add up all of your unsecured debts on the List of Creditors. Next, divide your total debt by the amount you determined you could pay. The resulting figure represents the number of months that would be required to repay your debts in full (excluding interest). If the number seems excessively long, you may wish to contact us for a free initial consultation to review your options – including a proposal to your creditors or a bankruptcy. See Your Options.

Download Personal Adobe PDF Forms (please allow for download time):

Consumer Bankruptcy Information

Personal Bankruptcy Questionnaire

Income and Expense Form

List of Creditors