We consider what living expenses you will be allowed if you declare yourself bankrupt.

When you declare yourself bankrupt you will need to complete a bankruptcy application form called a Statement of Affairs.

This Statement of Affairs form will ask you for information about your personal circumstances including how much you owe, what assets you have if any, your income and of course your living expenses.

Understanding what living expenses you need and what will be reasonably acceptable is extremely important.

Why is your living expenses budget important?

Once you declare yourself bankrupt, it is the duty of the official receiver (OR) to make sure that you pay back as much as you can to your creditors.

Part of the decision about what you repay is based on your disposable income. Your disposable income is the difference between the money you have coming in (your income) and the amount you need to live on each month – your outgoings or living expenses.

If you have disposable income of more than c£20 a month you will be expected to pay this over to the official receiver for three years.

For this reason it is extremely important to make sure that you present the OR with living expenses figures which are reasonable and comprehensive (not missing any of your expenses out).

If give the official receiver a comprehensive set of figures, then you can be confident that you will not be asked to pay more than you can afford. However if you miss out some of your expenses, the official receiver will make a decision about what you can pay based on expenses figures which are too low and will probably ask you to pay an unaffordable amount.

Completing your expenses on the bankruptcy application form

Section 7 of the bankruptcy statement of affairs application form is concerned with your outgoings. This is the section of the form where you record all of the living expenses you need during the month.

One of the difficulties with the bankruptcy statement of affairs form is that section 7 does not give a clear breakdown of every type of monthly outgoing you might need. It asks about a few major living expenses and then expects you to record everything else you spend each month in a general box called “other essential payments”.

If you are unsure yourself about what living expenses you need each month then this is not very helpful and can easily lead you to miss out vital expense items. 

For this reason before you complete section 7 of your bankruptcy application form, you need to list out all of your living expenses on a separate piece of paper.

Once you are happy with your expenses list you can transfer the figures to your bankruptcy application form making sure that the other essential payments box is comprehensively completed.

Bankruptcy living expenditure guidelines

The golden rule when listing out your bankruptcy living expenses is include all of the amounts that you feel you need to spend each month.

It is sometimes difficult to remember all of the different things that you spend your money on especially as some of these expenditures such as car repairs do not happen regularly each month.

For this reason it is useful to use a guide such as the Beat My Debt bankruptcy living expenses guide. This guide will help you remember all of the areas that you might need to spend money on each month.

Not only that, the guide will also give you an indication about what level of expenditure is considered to be reasonable in each area.

You need to remember that if you try to include expenditure budgets which are unreasonably high based on your circumstances, then these will be questioned by the official receiver and you will be made to reduce them.

Need to spend more?

If there are legitimate reasons why you need to spend more than the amounts suggested as reasonable in the bankruptcy living expenses guide, then do not be concerned about including a figure which accurately reflects what you spend.

However you must understand that you will need to be ready to justify such expenditure and this could be challenged by the official receiver.

For example if you need to spend more than the average on food because of special dietary requirements, make sure you highlight these reasons on your application form.

At the end of the day there is no absolute set of bankruptcy living expenditure figures that the official receiver will definitely accept. Each individual set of circumstances is different and the OR will base their decision on what you need to live on, on their understanding of your situation. As such the more information you can give them about the expenses you need the better.

Having said that you must always remember that the OR’s duty is to recover as much money as possible for your creditors and so they will want to make sure that you are living as frugally as possible.

Related bankruptcy articles

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What to do next

If you are struggling with debt and are considering bankruptcy, visit www.beatmydebt.com
 
Our experts are available to speak to you about the bankruptcy option and offer further help and advice.

Our vibrant online debt forum gives free access to experienced industry experts and others who have suffered with debt problems and have been through the bankruptcy process themselves.

Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.

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