Debunked: Bankruptcy Does Not Mean No Access to Money or Bank Accounts

The common fear that declaring bankruptcy cuts off all access to money or bank accounts is not founded in reality. In fact, during bankruptcy, you are not only allowed to have a bank account but you can also access funds for your essential daily needs. However, navigating through bankruptcy does come with specific conditions and limitations regarding your finances.

Bank Accounts and Bankruptcy: Managing Your Financial Waters

While navigating through bankruptcy, you are permitted to open a bank account to manage your day-to-day money. It is crucial to inform the bank of your bankruptcy status as this may influence the types of services and accounts available to you. This account should primarily be used for personal income and expenses and should not hold significant funds that could be considered assets by your trustee.

Income Contributions: Sailing Against the Financial Tide

Your capacity to earn income remains unrestricted during bankruptcy. However, if your income sails above a certain 'income threshold', you might need to make contributions to your bankrupt estate. This threshold is adjusted based on the number of dependents you have and is reviewed periodically. Contributions are calculated from your after-tax income, considering allowable deductions and the required contributions.

Living Expenses: Keeping Your Ship Afloat

You are entitled to retain enough income to cover reasonable living expenses for yourself and your dependents. Your bankruptcy trustee will assess the cost of necessities such as food, housing, utilities, transport, medical care, and education to determine what constitutes reasonable expenses. It's important to maintain a budget and keep detailed records of your income and expenses during this period.

Windfalls and Inheritances: Unexpected Financial Currents

If you encounter a financial windfall or receive an inheritance while bankrupt, these funds may be claimed by your trustee to settle debts with your creditors. Windfalls can include unexpected earnings like lottery winnings, inheritances, or proceeds from legal settlements. It is essential to inform your trustee about any such funds received during your bankruptcy.

Savings: Securing Your Financial Lifelines

You are permitted to save money from your income during bankruptcy, provided your earnings are below the income threshold for contributions. Any savings from income not exceeding this limit are safe and will not be claimed by your trustee.

Conclusion: Navigating Financial Management During Bankruptcy

Having access to money and managing your finances prudently during bankruptcy are critical for maintaining a basic standard of living. While bankruptcy imposes certain restrictions and obligations, these are designed to balance your need to support yourself and your dependents with the need to repay creditors. Understanding and adhering to these financial guidelines is key to effectively managing your bankruptcy. Should you have concerns or questions about your financial situation during this challenging time, it is advisable to consult with your trustee or seek guidance from a financial counsellor.