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Help Guide

A bankruptcy worksheet is an excellent way to organize your finances and will help you determine if filing for bankruptcy is a good option for you. This help guide will explain how to create a bankruptcy worksheet using LegalNature and elaborate on the guidance provided in the form builder.

Reason(s) for Pursuing Bankruptcy

You will begin by selecting all the reasons why you are interested in pursuing bankruptcy. When you file bankruptcy, something called an "automatic stay" goes into effect that legally prevents your creditors from contacting you while your case is pending. Many people also file bankruptcy after suffering a dramatic loss in income. This can be due to a variety of reasons, including a job loss or reduction in pay. Divorce is also another common reason. Often, one of the spouses can no longer afford to keep up with repaying debts after losing access to the other spouse's income.

Other common reasons include filing bankruptcy to relieve large medical debt, to stop wage garnishment or collections lawsuits, to prevent home foreclosure, and to prevent auto or property repossession. If either of these last two reasons applies to you, time is of the essence for your case, and it is recommended that you contact a bankruptcy attorney as soon as possible in order to get the ball rolling.

Furthermore, this list of reasons is not exhaustive. You are able to input additional reasons why you feel you might be a good candidate for filing bankruptcy. Keep your reasons short, as you will be able to give a more thorough explanation for your particular financial situation when giving your case explanation.

Nature of Debt

Indicate here whether your debt is personal, from a business you own, or both. If part or all of your debt is business debt, then be sure to include the related debts in your answers to the remaining questions.

Case Explanation

When entering your case explanation, this is your chance to be more descriptive as to how you found yourself in your current financial situation. Briefly explain your income and major expenses. For instance, indicate whether you are responsible for supporting any dependents or whether someone in the family has suffered a major health problem. Then explain how you acquired any large debts that you owe.

Types of Debt

Next, you will need to estimate the amount of each type of debt that you owe. Try to be as accurate as possible. It may be a good idea to obtain a recent credit report for this step.

"Personal loan debt" includes all loans for which you are personally liable for repayment. If the debt was acquired in your capacity as a sole proprietor or as a partner in a partnership, then chances are you are personally liable for such debt.

"Legal judgment debt" is any debt you owe as a result of suffering an adverse legal judgment. For instance, if you were found liable in civil court for causing someone's injury and are therefore liable for paying his or her medical expenses, then include the judgment amount here.

Mortgages and Auto Loans

Indicate whether or not you are responsible for repaying any mortgages or auto loans. If so, state whether you are up to date on the payments. If you plan on keeping your home or car, then it is recommended that you continue to make the required payments. However, you may be able to renegotiate your payments. For instance, the Home Affordable Modification Program (HAMP) is a government program designed to help homeowners facing foreclosure. Depending on your situation, this legislation may require your lender to modify your repayment plan.

Income and Expenses

In this section, try to be as accurate as possible in estimating your current monthly income and expenses. It may be helpful to use the average of your monthly income and expenses over the past three to six months in order to give you a better picture of your financial circumstances.

Real Estate and Personal Property

Next you will itemize all your valuable possessions. "Personal property" includes any assets you own besides real estate and includes things such as cash on hand, bank accounts, and retirement accounts.

Final Steps

Once you have completed all the steps, you will be able to use your bankruptcy worksheet as a snapshot of your current financial situation. This can be helpful when combined with online tools or an experienced bankruptcy expert who can evaluate your options to determine whether bankruptcy is right for you. However, as a general rule of thumb, bankruptcy is often a good idea when the value of your total debt is more than the total value of your assets. If you fall into this category, then it may be time to get serious about filing bankruptcy.

Ready To Get Started? Create a Bankruptcy Worksheet

Frequently Asked Questions

What is a bankruptcy worksheet?

A bankruptcy worksheet is used to help you to determine if filing for bankruptcy is the best option for you based on your financial situation. Before you even consider filing for bankruptcy, you need to use a bankruptcy worksheet so you can ensure you are making the right decision in terms of your finances. To help you to create a bankruptcy worksheet, be sure to check out this guide that will walk you through everything that you should consider, including the following:

  • Your current types of debt. There are many types of debt and some are considered to be worse than others. Your bankruptcy worksheet will take a look at the types of debt that you currently have to help you to determine the severity of your debt.
  • How much debt you currently owe. You will need to take an honest look at all of the debt you owe so you can realistically know what you are looking at. This will also prepare you to determine if it is possible for you to pay for the debt on your own.
  • A review of your income and expenses. It is not enough to just know how much you make; you must also know where your money is going every month. To do this, you need to take an honest look at your income and expenses to determine if there are places you can cut back on spending and focus more on paying your debts.

How do I use a bankruptcy worksheet?

In order to get the most out of your bankruptcy worksheet, you have to be very honest with yourself and take a detailed look at your finances. There are several steps you will need to go through. Use these steps to get the most out of your bankruptcy worksheet.

  • Consider why you want to file for bankruptcy. You likely have a good reason to file for bankruptcy, but the first step of the bankruptcy worksheet is to write these reasons down. There are many reasons that are valid for filing and you need to be sure of what you want to achieve through the process.
  • Classify your debt. When you are taking a look at your debt, you will need to determine whether it is personal debt, a business debt, or if you have both kinds that you want to focus on.
  • Explain your case. While you briefly mentioned your reasons for wanting to file for bankruptcy, you will use this section to go into more detail about your current situation. You will also use this section to list any major expenses you may have, including dependants.
  • Estimate your debt. Take the time to write down all of your debt, the amount owed, and the kind of debt it is so you really know what you are looking at for your bankruptcy filing.
  • Outline mortgages or auto loans. You will need to detail any mortgages or auto loans you are responsible for repaying. Also, make a note of whether or not you are up to date on your payments. If you are planning on keeping these items, you should continue to make payments through the course of your bankruptcy.
  • Detail your income and expenses. Be sure to write down all of your monthly income and expenses so you know the amount of disposable income you will have.
  • List your real estate and personal property. You should detail all of the assets you currently have including your retirement accounts and any property you own.
  • Use your complete financial snapshot. You will use this complete snapshot to determine whether or not bankruptcy is right for you and if so, the type of bankruptcy you may want to consider.

What is Chapter 13 bankruptcy?

Chapter 13 bankruptcy is typically the bankruptcy option people turn to if they do not qualify for Chapter 7 bankruptcy. This type of bankruptcy is not designed to completely wipe out debt. Instead, it is the type of bankruptcy that allows the debtor to create a feasible plan to repay all of his or her debt. Debts are often repaid at only pennies on the dollar—meaning that only a fraction of the outstanding debt will ever need to be repaid.

The idea is that the debtors will propose plans to their creditors to repay all of the debt using an installment plan that will last anywhere between three to five years. The time frame is set at three years if the current monthly income of the debtor is set to less than the applicable state median set forth by law. However, the court can always approve longer repayment terms if there is a good cause for it. No plans are allowed to last longer than five years.

During this time frame, all creditors are prohibited from starting or continuing collection efforts against the debtor. For this type of bankruptcy, it is not required that you sell your assets in order to pay off your debt. This aspect often makes Chapter 13 bankruptcy very appealing. There is no income limit on this type of bankruptcy, but you are limited to the amount of debt you can file under Chapter 13 bankruptcy. Currently, the debt limits are set at $394,725 of unsecured debt and/or $1,184,200 of secured debt. If you have debt that is more than these amounts, you are not eligible to file for Chapter 13 bankruptcy.

What is Chapter 7 bankruptcy?

Chapter 7 bankruptcy is a type of bankruptcy that involves a process for debtors to eliminate most of their debts. Through the process, debtors have the opportunity to start over with a clean slate in terms of their debt and credit. It is essentially a process that allows people to start over financially once it has been completed.

However, it is not always the ideal option and depends on people’s individual circumstances. This is due to the fact that in order to remove debts, many of the debtor’s assets must be sold, if possible. Assets are used to pay for as much of the debt as possible. In the end, the debtor is freed from debts even if they have not been paid in full through the sale of their assets.

Who can qualify for Chapter 7 bankruptcy?

As of 2005, debtors must pass the "means" test in order to qualify for Chapter 7 bankruptcy. The "means" test is used to determine whether your income is low enough relative to your necessary expenses to qualify for Chapter 7 bankruptcy. The test is a specific formula designed to prevent high-income earners from taking advantage of the system. The idea behind it is to ensure that anyone who files for Chapter 7 bankruptcy genuinely needs assistance to pay off his or her debts.

The formula used takes the current income of the potential filer and then deducts monthly expenses to determine disposable income. The higher your disposable income, the less likely you will qualify for Chapter 7 bankruptcy. If you make too much money, you cannot use Chapter 7 bankruptcy to completely wipe out your debt, but you do still have the option of filing under Chapter 13 bankruptcy.

What is the difference between Chapter 7 and Chapter 13 bankruptcy?

There are many key differences between Chapter 7 and Chapter 13 bankruptcy that can help you determine which one may be the better option for your needs. These are some of the key differences between the two:

  • Length of time: Chapter 7 bankruptcy can be completed and debts discharged in anywhere between three and five months. Chapter 13 bankruptcy is not completed until all payments are made, which can take anywhere from three to five years depending on the terms.
  • Property: In Chapter 7 bankruptcy, all eligible assets are sold to pay for the debts, which includes any property owned by the debtor. However, with Chapter 13 bankruptcy, debtors are able to keep more of their property and make payments instead, thereby allowing them to keep the assets they have worked too hard to pay for in the past.
  • Who can file: With Chapter 7 bankruptcy, both individuals and business entities are able to file. With Chapter 13 bankruptcy, only individuals, including sole proprietors, are able to file.
  • Eligibility requirements: Chapter 13 bankruptcy has set limits on the amount of debt you can have in order to be eligible. Chapter 7 bankruptcy has set income limits and uses a "means" test to determine eligibility.

What are the steps for filing for bankruptcy?

The steps for filing for bankruptcy vary depending on the type of bankruptcy you are interested in and some additional steps you may have to take for each.

Steps for Filing for Chapter 7 Bankruptcy

Follow these steps for Chapter 7 bankruptcy:

  • Get credit counseling. You cannot file for Chapter 7 bankruptcy without it. The credit counseling course must be one that is provided by a government approved agency. Many are available online or over the phone.
  • Take the "means" test. You must then determine your eligibility, meaning you will need to take the "means" test.
  • List your debt and prepare for filing your paperwork. Once you have decided that you can file for Chapter 7 bankruptcy, you will need to gather your documentation and file your petition with the court. You can also reach out to an attorney to help you with this process.

Steps for Filing for Chapter 13 Bankruptcy

Follow these steps for Chapter 13 bankruptcy:

  • List your debts, income, and assets. You will need to know exactly where you stand with each of these items so you can ensure Chapter 13 bankruptcy is the right option. Take a look at your income to ensure you have enough to pay down your debts on a payment plan.
  • Make sure you qualify. To qualify, your debts cannot be over these limits: $394,725 of unsecured debt and/or $1,184,200 of secured debt.
  • File your paperwork. Once you have completed these steps, you can follow up with filing your paperwork with the court. You may also consider reaching out to an attorney for assistance.

What debt can I include in a bankruptcy?

Before you file for bankruptcy, it is important to understand what it can and cannot do for your debt situation. There are some debts that are covered in a bankruptcy as well as some that cannot be included. These are some of the types of debts you can include:

  • Unsecured debts: Unsecured debt would include credit card debt unless you have a secured card. Credit card debt is the most common type of unsecured debt, but there may also be other kinds.
  • Medical bills: If you are unable to pay your medical bills, you can include these debts in your bankruptcy filings.
  • Utility bills: In this case, you can only include past due amounts.
  • Personal loans: Personal loans that qualify include those from friends, family, and even from your employer.
  • Collection agency bills: Not only can you include these debts in your filing, but as soon as you file, an automatic stay will be initiated so they cannot contact you for payment.
  • Past due rent: If you are being sued or owe money under your lease agreement or a previous one, you can include those amounts in your bankruptcy.

These are some of the types of debts that cannot be included:

  • Tax debts
  • Student loans
  • Child support and alimony

What are the effects of bankruptcy?

There are both positive and negative consequences of bankruptcy. These are just a few of the impacts of bankruptcy that you can expect:

  • Lower credit score: A bankruptcy can stay on your credit report for seven to ten years and during that time, you will see a lower credit score as a result. Eventually, though, your credit will get better and possibly be stronger than it was in the beginning.
  • Difficulty getting loans: As the bankruptcy is on your record, many companies will not want to approve you for loans or other forms of credit.
  • A fresh start: At the end of your bankruptcy, you will have a fresh financial start so you can do things right and begin to rebuild your life. It may take some time, but you will not have to battle your debts to achieve your goals.

Ready To Get Started? Create a Bankruptcy Worksheet

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Step 1: Gather Information

As you complete your bankruptcy worksheet, you will need to collect and provide estimates for the following information:

  • The types and amounts of all your current debts
  • Your current income and expenses
  • The value of all your assets, including any cars or homes and all your personal property

Step 2: Answer Key Questions

Use the information you collected to complete the bankruptcy worksheet. We make this easy by guiding you each step of the way and helping you to customize your document to match your specific needs. The questions and information we present to you dynamically change depending on your answers and the state selected.

Step 3: Review

It is always important to read your document thoroughly to ensure it matches your needs and is free of errors and omissions. After completing the questionnaire, you can make textual changes to your document by downloading it in Microsoft Word. If no changes are needed, you can simply download the PDF version and sign. These downloads are available by navigating to the Documents section of your account dashboard.

Step 4: Determine If Bankruptcy Is Right for You

Once you have completed all the steps, you will be able to use your worksheet as a snapshot of your current financial situation. This can be helpful when combined with online tools or an experienced bankruptcy expert who can evaluate your options to determine whether bankruptcy is right for you. However, as a general rule of thumb, bankruptcy is often a good idea when the value of your total debt is more than the total value of your assets. If you fall into this category, then it may be time to get serious about filing for bankruptcy.

Discuss your options with a bankruptcy attorney or experienced professional. Due to the complexity of filing for bankruptcy, most people decide to hire an attorney to ensure the process goes smoothly. However, it is perfectly legal to file on your own (called filing "pro se"), and this may save you money. If you choose this option, be sure to call or visit the bankruptcy court in your district to learn about the process and other helpful tips. Take care to stay very organized through the process and complete any requirements the court may ask of you.

Ready To Get Started? Create a Bankruptcy Worksheet