Questions you have before making a decision to go Bankrupt and the Bankruptcy process

Moderators: TalbotWoods, JaneClack

By Brett
#2832 Hi,

Does anyone know what sort of guidelines the OR uses in assessing what 'allowable' expenses are used in deciding to impose an IPA? I'd like to avoid shooting myself in the foot by showing any expense higher than considered reasonable, or not allowed.

Many thanks
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By JaneClack
#2836 You should put down what you pay out and be prepared to justify it. Telephone bills of over £40 per month would be scrutinised but rent, utilities and car expenses etc to get to work are what you pay. Clothing - around £30 per month would be acceptable and for a single person £200 for housekeeping - any more and it would need to be justified and not £200 per person in a family! - perhaps you need a gluten free diet etc; you may have an illness that needs medication or therapy. You put down what you spend but smoking and leisure should not appear! Remember that if you do have a surplus income it is only reasonable that something should be paid - the OR usually only wants about 60% of this - and it would only be for 3 years which is shorter than any DMP or IVA!
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By JaneClack
#2866 Yep - that is useful! Didn't realise the bit about child benefit shouldn't be put down in an income but when you think about it, it shouldn't. After all that is for the benefit of the children and as we keep pointing out no-one else is responsible for paying off another's debts. Thanks mrsmith!
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By JaneClack
#2868 It may suggest the holiday business but I do not think anyone would be able to get that past an OR! Yes, I know it says that on the site but I still think this would be overruled!

The OR is always more generous than creditors would be in an IVA or DMP.
By mrsmith
#2871 Well these are the official government guidelines for the OR when an IPO is applied for so I'm not sure how they can be ignored by the OR, but I will bow to your greater experience if that would be the case.

This is the extract.

Previous guidance stated that money for holidays should not be included in the calculation of funds available for an IPO, other than in exceptional circumstances, for example where a dependant was sick or disabled. Whilst extravagance is not endorsed in this regard, it is accepted that a bankrupt, like anyone else, may be expected to benefit from a break from routine and therefore some allowance may be made for a modest holiday. A figure of £60-80 per month is reasonable for a family of four, any extra should be funded out of the disposable income left with the bankrupt.
#2872 I was allowed to put about £30 per month towards a holiday (couple). Clothing we were allowed I think about £60 or there abouts between us....I think it may partly depend on who you deal with and your individual circumstances.
By keepchinup
#2873 ...and I was allowed £60 per month towards holiday - family of 3.

good luck to all

don't forget dentists, prescriptions, provision for house repair (say £15 per month in case roof gets blown down), dry cleaning - you have to look smart for work and a haircut per month. all stuff I was allowed. I wasn't taking the mickey, it's just that when you're in debt you don't do all this stuff, but once you're free why shouldn't you do like normal folks?
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By JaneClack
#2889 Well, if the OR has allowed it I would go for it.

We would not necessarily recommend putting this down on an income and expenditure it as there are many people who are not bankrupt who cannot afford to put money aside for holidays. It really does show you how it can be better to go for bankruptcy rather than repaying a debt over a long period of time or an IVA because the creditors are really mean about expenses like that! It also goes to show that you should put down what you spend - as Simon has always advised - and if you can justify it, it should be accepted.

However as the OR seems to be allowing it - at least in some circumstances - it can only be good news.
By Brett
#3000 Thanks everyone for your valuable input.