With any debt solution, reasonable living expenses will be taken into consideration when establishing what disposable income is available to repay creditors. However, it can often get confusing as to just what is considered a 'reasonable living expense'.
As living expenses can vary by location (for example, rent is likely to be much higher in London than Nottingham), the area in which the individual lives will also be take into consideration when looking at expenses.
Essential expenses will include the following:
• Rent or mortgage
• Monthly food allowance (this could be up to £200 for a single person and £300 per couple and will include toiletries and cleaning products)
• Utility bills, which could include gas, electricity and water
Additional 'reasonable' living expenses
• Mobile phone (provided it is at a reasonable amount)
• TV licence
• Car tax and insurance
• Child Maintenance
• Building and Household Content insurance
• Dental Treatment
• Opticians fees
• Clothing (£25 per month for a single person, £40 for a couple)
• Rented goods, such as TV, Washing Machine etc
• After school activities
It is possible that additional expenses could be included, such as hairdressing, pets and holidays, though these may be assessed on an individual basis.
What is not considered a 'Reasonable' living expense?
• Membership to clubs or professional bodies where it is not required for work purposes (eg Gym membership, Social Club, Sports expenses)
• Charitable donations
• Satellite/Cable TV (though this may be considered if at a reasonable level)
• Additional mortgage repayment (assuming the individual does not have to sell their home)
• Money for Cigarettes and Alcohol
• Private Health Insurance
• Additional Pension Contributions
When applying for Bankruptcy or indeed any other debt solution such as an Individual Voluntary Agreement (IVA), the Official Receiver, or Insolvency Practitioner, will always review each case on its own merits, so it may be that there are additional inclusions and exclusions and a degree of common sense should be used when considering what can and cannot be included.
Anyone considering bankruptcy, or has questions during the process, should always seek advice from either a licensed money advisor or Insolvency Practitioner, or from one of the free advice services available, such as the Citizens Advice Bureau (CAB), National Debtline or the Consumer Credit Counselling Service (CCCS).