If you go bankrupt you will need to complete an income and living expenses budget. This will be used to work out if you have any surplus money with which to make a monthly payment towards your debts.
Included in this article:
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Many of the items you must include in your bankruptcy living expenses budget can be taken straight from your bank statement. These are things you can’t easily change from month to month like rent payments and utility bills.
Of course, rents and utility bills vary across the country and depend on the size of property you live in. As long as what you pay is reasonable based on your circumstances, there should not be a problem. The only time the Official Receiver (OR) could question your rent, is if you live in a property which is much larger than you seem to need.
There are however, a number of other types of expenses that are not fixed. Things such as the amount you spend on food shopping, clothing or petrol. How much should you include in your budget for these when they can differ so wildly between different people and families?
The following list gives an indication of what is acceptable in bankruptcy for some of these main variable expenses:
Food shopping: (Single Adult) £200-£250/mth; Couple £350/mth; Each dependent £90/mth
Clothing & Footwear: (Single Adult £30/mth; Couple £50; Each dependent £20/mth
School Uniform: £17/mth per child (£200/yr)
Petrol: (per car) £150-£175/mth
Car MOT and Servicing: (per vehicle) £20-£40/mth
Hobbies & Entertainment: (Single Adult £20-30/mth; Couple £30-£40/mth; Each dependent £10-£15/mth
When completing your living expenses budget, remember to include allowances for things you don’t pay regularly but you do have to pay eventually. For example car servicing.
The figures indicated above are known by Bankruptcy Expert to be generally acceptable to the OR. However it is important to understand that the amounts eventually agreed will also depend on your specific circumstances.
If you need to spend more and you have legitimate reasons for this, you should use the amount you are comfortable with. As long as you can justify the increase as reasonable in your circumstances, it should be accepted. For example you might live a long way from work and have to spend far more on petrol. The OR should understand and accept this.
You may receive extra income such as DLA or PIP due to special needs or disabilities. There is no need to try and list the additional expenditures you have associated with these payments. Simply include an amount equal to the benefit money you receive at the bottom of your expenses list. In this way the income is simply cancelled out with the same amount of expenditure.
Do not worry if your total living expenses on paper is less than your income. If this is is a true reflection of your situation, don’t change anything to make the figures look better.
Getting your living expenses right in your bankruptcy application is very important. The OR will use your figures to calculate if you have any surplus money after all your expenses are accounted for. It is not their job to check if you have made a mistake.
If you have no monthly surplus (or a negative surplus), you will not be required to make further payments towards your debts. Given nothing changes, your bankruptcy will end after 12 months. Where you do have a surplus, you will be required to pay 100% of your share towards your debts for 3 years.
If you use figures that are two low or you miss something out, you could find yourself facing monthly payments towards your debts that you can’t afford.
What if you make a mistake? What if you are already bankrupt, but you have now realised that the expenses figures you gave in your application are wrong? In these circumstances you need to inform the OR straight away. You should be allowed to submit new figures. As long as they are justified they should be accepted.
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