Preparing for bankruptcy

Your Finances

Income payments order/agreement

When you go bankrupt your income and expenditure will be assessed at various stages. This is to assess your ability to contribute some of your income to the bankruptcy estate for a period of up to three years. The trustee will consider the household income and household expenditure to determine how much you should pay.

By knowing your expenditure allowances, the various rules and insolvency service policy you may be able to make the official receiver aware if there are matters not being considered. Although everything should be taken into account and dealt with fairly this does not always happen. Depending on your situation, and by arming yourself with the knowledge, you could negotiate a lower figure or escape payments all together.

For example, if you only earn enough to meet the reasonable domestic living needs of you and your family then there should be nothing to pay.

Managing your finances

Finances during bankruptcy can be tough. Consider using a personal accounting package to help you budget and keep better track of your money. Consider the Personal Accountz software. You could also use a pen and paper or a spreadsheet, although software will make life much easier for you. This will also help you to produce reports on your expenditure. They could be used to prove to the Official Receiver that they are taking too much money from you if need be.

Bill payments

At the date of your bankruptcy or very shortly afterwards you will be asked for your bank account details. Following this your bank account may be frozen for a period of time. For this reason you should seek to make alternative payment arrangements for your direct debits and standing orders. You won't want to get behind on your payments straight after bankruptcy.

As previously mentioned, consider the Cashplus prepaid Mastercard for banking.

When contacted about your bank account you should explain which bank account you intend to use on a day to day basis. You may be allowed to continue to using it. Any cash that you have in your accounts, or in hand, will have to be accounted for. It is therefore worth keeping receipts from the date of the bankruptcy.

You should bear in mind that during your bankruptcy it is an offence to take on credit totalling more than £500 without declaring your bankruptcy to the credit provider(s). This applies whether the credit account is in your name or jointly with someone else. It applies to the total amount of credit you accumulate during the bankruptcy period, not the amount in a single transaction.

Mobile

A couple of practical issues come to mind concerning mobile phones.

• when you apply for one you will be credit checked
• affording one during bankruptcy becomes more difficult but not impossible. This is because you are usually only given a small allowance.

When I went bankrupt I found a solution to this. Whether you can take advantage of it will depend on the termination date of your contact and the network that you use.

Before I went bankrupt my phone contract had expired and was simply rolling. I therefore moved onto the cheapest contract. The reason that I did this was because when I was ready to upgrade there would be an increased chance that no credit check would be conducted by the phone company. This was because I had already been running an account correctly. This paid off and I was able to upgrade later without being credit checked. Along came the new Blackberry!

Whether this will work for you depends on a number of factors, such as the particulars of your existing contract and the mobile network that you are contracted to. Usually some careful research will help you decide.