Living Expenses Allowances for Bankruptcy

Living Expenses Allowances for Bankruptcy

If you go bankrupt you will be allowed a reasonable living expenses budget. This includes all the things that you and your family need to live on although there are various restrictions.

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Why is your Bankruptcy Living Expenses Budget important?

You will be expected to complete a living expenses budget as part of your Bankruptcy application. In England and Wales this is section 6 of the online form.

The Official Receiver (OR) will review the budget carefully. They will deduct your reasonable expenses from your income to calculate if you have any surplus. If you do you will be required to pay this towards your debts.

Getting the figures in your expenses budget correct is therefore very important. If you miss anything out or include a figure that is to low the amount you can afford to pay to your creditors will be overstated.

If you are already bankrupt and have been asked to make payments towards your debts that you cannot afford ask the OR for a review of your living expenses budget.

A bankruptcy living expenses budget consists of 5 main categories: Home and Utilities; Pension and Health; Food and Housekeeping; Travel; Personal and Leisure. You will need to think about your expenditure in all of these areas.

Some of your expenses will be fixed. For example your mortgage or rent, council tax and utility bills. You should include the exact amount you spend on each of these in your budget. If you pay something annually such as council tax or car insurance divide by 12 to get the monthly figure.

Other expenses are variable such as the amount you spend on food, petrol and entertainment. The problem with these is that it is hard to know exactly what you are allowed to spend. To help we have made available comprehensive guidelines.

See our Bankruptcy Living Expenses Guide for a list of the expenses you should consider for your budget and recommended amounts for each.

Where you believe you need to spend more in any area you should not be scared to include a higher amount. However you must be prepared to justify this to the Official Receiver (OR).

A good example of where a higher budget will be allowed is if you or a family member have special dietary requirements. As a result you may need to spend more on food. Alternatively your job may be far from your home and so you legitimately need to spend more on fuel or public transport.

Given the additional expenditures you need are reasonable and justifiable they will be allowed. However expenditure on perceived luxuries (for example a high food expenditure due to expensive tastes) is not likely to be acceptable.

If you receive disabled living allowance or a PIP you do not have to justify how this money is spent. You simply include the same amount in your expenditure budget and describe it as “PIP Expenditure”

What if your Children are Over 18?

You may have children living with you who are over the age of 18. The amount you can included in your living expenses budget to cover their needs will depend on the particular circumstances.

If they are still in full time education and dependant on you it will be reasonable for you to include more in your groceries budget to cater for them. Where they are away at university you may also be allowed to include an amount to support them.

However if your children are over 18 and working the OR is only likely to allow addition expenditure to support them if they are contributing to the household income.

Need help with your bankruptcy living expenses budget? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts.

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    4 thoughts on “Living Expenses Allowances for Bankruptcy

    1. Sam says:

      I’m thinking about going Bankrupt. I have 2 19 year olds who are working full time. They both earn £1250 a month each roughly. How much is a reasonable amount for them to be contributing to the household income? What about the living expenses?

      1. Hi Sam

        Given your children are working full time and earning enough money to “support themselves” the official receiver will no longer consider them dependent on you. I would suggest a reasonable contribution for “lodging” would be £50/week each so c£200/mth per individual.

        Remember as they are not classed as dependent it will be extremely unlikely that the OR would allow you to include any budget for their living expenses in your living expenditure budget. They would be seen as lodgers. As such you cannot include any budget for them in your housekeeping as the OR would reasonably assume they are paying this themselves out of their own money. So if it is you and your wife your allowable housekeeping budget would be around £350/mth.

    2. Simon says:

      I’m planning to go bankrupt. I work for an airline and get paid a tax free subsistence allowance into my salary when overseas and staying in a hotel to cover meals. (Subsistence amounts are set by HMRC) This cost would make my budget for food much higher than normal as I have no choice other than eating in the hotel. Would this be acceptable as an expenditure? Many thanks

      1. Hi Simon

        The subsistence element of your income is another name for business expenses. This is paid over and above your salary to cover the extra costs you incur due to your hotel meals. As such it does not form part of your true income. This extra income and the associated expenditure should therefore be disregarded when completing your income and expenses budget.

        It is very important to get this right. So if you would like further advise by all means give me a call (0800 077 6180).

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