Save during Bankruptcy
- 03 Feb 2022
There is nothing to stop you trying to save while you are bankrupt. The question is how do you actually do it?
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- Are you allowed to save during Bankruptcy?
- Can you keep all the money you put aside?
- How to save if you are Bankrupt
Are you allowed to save during Bankruptcy?
The answer to this is yes you are allowed to save during bankruptcy. Shortly after you go bankrupt you will agree your living expenses budget with the Official Receiver. Once this is done you are then left to manage your budget yourself. The Official Receiver does not do this for you.
You have to ensure that any Income Payment you have agreed is made on time. But after that you are responsible for spending or saving the money in your budget in any way you like. It is not just allowed but actually important that you do save some of this.
It is likely that some of the allowances in your budget are for bills that you do not have to pay each month. For example there may be amounts for car or home repairs. You should save save these amounts. If you do not the money will not be available when the bills come up. You should also try to save so that you have money put aside to cover unexpected financial emergencies.
Can you Keep the Money you put aside during Bankruptcy?
There is no limit to the amount you are allowed to save during bankruptcy. The only rule is that any money you put aside must come from your agreed living expenses budget. If you receive any type of additional cash it is unlikely that you will be able to save any of that money. You will have to declare it to the Official Receiver as a windfall and it will normally have to be paid to them.
You may only be able to save a small amount each month. Perhaps only the allowance you have been allowed for emergencies. However if you can save more by cutting back on any of your other agreed expenses there is nothing stopping you from doing so. It will mean that you save a bit more money which you can fall back on if and when you need it.
Money you save from your agreed living expenses budget while bankrupt is yours to keep. If you do not need to spend it does not have to be paid to the OR.
How to save if you are Bankrupt
Saving is not easy at the best of times let alone if you are bankrupt. However if you manage your monthly expenses budget correctly it should be possible. The first thing you need to think about is how much you can save.
It is unlikely that you will be allowed a budget in your expenses specifically for saving. However there may well be other amounts that you can identify which are not required for day to day living which you can and should save. For example the amounts you have been allowed for car and home maintenance, emergencies and dental/optical expenses. You should add all these amounts together and this will give you the amount you should save each month.
The best way to save during Bankruptcy is to do it as soon as you receive your income. Think of the amount you save as just another bill that has to be paid. You can even open a savings account at your bank so that you can transfer the money out of your main account. In that way it will be out of sight and you will be less tempted to use it for top up your day to day living expenses.