What allowable living expenses am I entitled to in bankruptcy?

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Even if you have been made bankrupt, you may still need money to pay your everyday living expenses. You may have a family to support and household bills to pay. But, how much are you allowed on a monthly basis? What allowable living expenses am I entitled to in bankruptcy? And, what expenses are considered ‘reasonable’? We answer your questions.

The Statement of Affairs

When you are declared bankrupt you will need to complete a bankruptcy application form called a Statement of Affairs. This form asks you for information about your personal circumstances including how much you owe, what assets you have, your income and your living expenses.

Once you are declared bankrupt, it is the duty of the Official Receiver 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’ – the difference between your income and your living expenses.

So, it’s vitally important that you outline all your living expenses. If you do, you can be confident that you won’t be asked to pay more than you can afford to your creditors. However if you miss out important living expenses, you could leave yourself short of money.

We’ll look at what are considered ‘allowable’ living expenses next.

Allowable living expenses

Before you complete a Statement of Affairs or other bankruptcy forms, it is advisable to list your living expenses on a piece of paper. Once you have made sure that you have included all your expenses on the list, you can transfer the figures to the official form.

It’s worth remembering that there is no definitive list of bankruptcy living expenditure figures that the Official Receiver will accept. Each individual set of circumstances is different and a decision will be based on what you need to live on and on the Official Receiver’s understanding of your situation. The more information you can give them about the expenses you need the better.

Things that are likely to be allowed as reasonable domestic expenses include:

• Rent or mortgage payments
• Council Tax
• Your utility bills (electricity, water, gas, landline telephone)
• Food
• Toiletries and cleaning products
• Clothing and footwear
• Your TV licence
• Membership of a professional body that is vital for your job
• Childcare, a long as you and your partner/spouse work
• Buildings and contents insurance
• Your car insurance, road tax and breakdown cover (assuming you have been allowed to keep your car under the terms of your bankruptcy)
• Prescription, opticians and dental costs
• A mobile phone

Things that are unlikely to be considered allowable living expenses under bankruptcy include:

• Satellite TV subscription
• Money for alcohol, gambling or cigarettes (‘these should not be funded at the expense of creditors’)
• Private healthcare insurance
• Charitable payments
• Gym membership

Family holidays and pet food/vet bills will be considered individually although the guidelines say these are ‘not allowable unless [it is] to cover [a] reasonable domestic need’.

It is also worth bearing in mind that expenses budgets which are high based on your personal circumstances will be questioned by the Official Receiver. You should therefore be realistic with your figures.