If you are thinking about going Bankrupt to deal with your debt problem we answer some of the important questions that you may have about the procedure.

Bankruptcy sounds like a very scary process to go through. It is true that making the decision should not be taken lightly. However once you understand more about it and get the relevant advice you will find that this particular solution can often be the best option to solve your debt problem.

1. Will I have to sell my household goods in Bankruptcy?

It  is simply not the case that you will be forced to sell all of your processions if you go Bankrupt. In fact you will almost certainly be able to keep your household goods including your fridge freezer, washing machine, furniture, clothes, TV, DVD player and computer.

You are allowed to keep all of your reasonable household items. You would only ever be at risk of having to sell any of your goods if you have something of significant value which you do not need or could be reasonably replaced with something cheaper such as expensive antiques.

2. What happens to overtime if I go Bankrupt?

Once you are Bankrupt the official receiver will review your income and living expenditure and expect you to pay towards your debt each month if you can afford to do so.

Normally your income will be based on your basic and guaranteed earnings and potential overtime will not be taken into account. However if you then earn extra overtime you have to tell the official receiver about it as and when it happens.

If the overtime you earn means that you have more money than you need to live on that month you may be obliged to pay these extra earnings towards your debts.

There may be certain circumstances when you are allowed to keep the extra overtime you earn to pay for unexpected expenses such as an unusually large car repair bill. However this is not a given and must be agreed with the official receiver before the money is spent.

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3. Can I keep my car on HP if I am Bankrupt?

If you have a vehicle on Hire Purchase (HP) you may well be able to keep it if you declare yourself Bankrupt. However you will need to be aware of a few things.

First you need to check the HP Company’s policy on bankruptcy. Many HP companies will be happy to keep your agreement running once you are bankruptcy as long as the monthly payments are maintained. However some will not so you need to confirm where your stand.

Then you need to consider the net value of the car. This is the market value less the outstanding finance. If this figure is less than £1000 you should be allowed to keep the car as long as it is required.

If your car is worth more than £1000 you may have to consider giving it up and getting a cheaper vehicle. You also have to consider the amount you are paying for the HP. This must be reasonable within the context of your other bankruptcy living expenses.

4. Can I make a PPI claim after I go Bankrupt?

If you feel that you have been miss-sold PPI then there is nothing to stop you making a claim for miss-selling after you have gone Bankrupt.

However you need to understand they if your claim is successful you will not benefit personally from any compensation received. Any compensation will be paid to the official receiver to be shared out between your creditors.

BMD Tip: Even after your Bankruptcy has ended and you have been discharged if you are subsequently awarded miss-selling compensation for one of your debts this will normally still be paid to the official receiver and you will not see any of it.

5. Can I include smoking expenses in Bankruptcy?

If you are a smoker, whether or not you can include a budget to cover the cost of smoking in your bankruptcy living expenses budget is an important question. Unfortunately there are no official guidelines for smoking expenditure.

The best advice is always to include a smoking budget in the living expenses section of your application form and then be prepared to discuss it with the official receiver.

More often than not you will be able to include a moderate smoking budget. However heavier smokers will probably not be able to claim for the full cost of their habit and it will have to be funded from other allowable budgets.