It is common to worry that you will have nothing left to live on if you go Bankrupt. This is because you will often hear or read that you will have to pay all of your disposable income towards your debts.

This makes it sound as though you will only be allowed enough money for food but will not be allowed to keep anything else for things like entertainment or running a car. In fact this is not true. You will always be allowed to live on a reasonable expenses budget.

Obviously however there are restrictions to the amounts you can spend and you will normally need to change the way you manage your money. We will explain how this works and how you will still be able to pay your bills after you go bankrupt.

Will I have control over my money after Bankruptcy?

When considering bankruptcy you may worry that you will not be allowed a bank account and so will lose control over your money. This is not the case.

It is likely that you will need to close your present bank account however you will be allowed to open a new one in your name called a card cash account.

Your income can be paid into this account and it will give you most of the standard banking facilities such as a debit card. You will have control over paying your bills and any living expenses from this account.

BMD Tip: Your present bank account will more than likely be frozen therefore it is important to change banks before you start the Bankruptcy application process.

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How will I afford to live once I am bankrupt?

Once you are bankrupt you will be allowed to keep enough of your income to support all of your reasonable living expenses. This budget will include everything you need to spend money on every month and even includes money for hobbies and entertainment and emergencies.

When you complete the application process you will be asked to give information about the  living expenses you need. It is vital to include not only your essential household outgoings such as bills rent or mortgage but also general living expenses such as money for leisure, clothes and emergencies.

Because your budget includes all of these things the idea that you will have to give up all of your income other than for your property and utilities is certainly a myth.

You must make sure the living expenses amounts you include are reasonable and be able to justify anything that goes over the recommended expenditure levels. It may be that you have a large travel bill each month because you have a long commute to work. However as long as you can prove this there will be no problem.

BMD Tip: Of course there may be certain luxuries that you may be used to buying each month that you will not be allowed to include in your budget. However once your budget is agreed you are then left to manage and spend it yourself. As such you can cut back in some areas and spend more in others if you wish. Once the budget is agreed it is your choice.

Will I have to pay anything towards my debt when I am Bankrupt?

Once you are bankrupt you will have to pay 100% of your disposable income towards your debt. This is any money you have left each month after all of your reasonable living expenses included in your living expenses budget have been accounted for.

You will have to pay your disposable income towards your debt for up to three years maximum. But remember you are only paying what you can afford after the money has been put aside to pay for all of your reasonable living expenses. Therefore any payment you have to make towards your debt should never be too restrictive.

BMD Tip: Once you are Bankrupt it is quite normal to end up paying nothing towards your debt if you have no disposable income.