Payments from income during Bankruptcy
You may be required to make payments from your income towards your debts for up to 36 months. This depends on the surplus money you have after you have met your essential living expenses.
If you have at least £100 over each month after you have paid for all your essential living expenses, the Trustee may claim monthly or weeks payment towards the bankruptcy.
You can use this income/Outgoing calculator for a guide as to what can be included as expenses needed for basic domestic living.
You will be assessed as to how much of this surplus income you are require to pay, which is normally between 50% and 70%. Generally, single people without dependants and those with greater surplus income are assessed towards the higher end of this range.
If your main or only income is state benefits or a state pension, then it is unlikely you will be required to make payments.
The Trustee claims the surplus income by means of a IPA or IPO.
Income Payments Agreement (IPA)
An IPA is a written agreement between the Trustee and the bankrupt. It is a binding agreement that states the bankrupt, or a third party, will make payments towards the bankruptcy for a specified period.
Income Payments Order (IPO)
An IPO may be sought through the court if a bankrupt won’t agree to a proposed IPA. If necessary, the court can arrange for an attachment of earning order to take the money directly from your employer or get benefits stopped.
IPO’s/IPA’s can last for up to 36 months which can continue after discharge from bankruptcy.
You may be required to make payments from any income, including pensions, towards your bankruptcy.
Missed IPA/IPO payments.
If you miss a payment, you will be required to provide an explanation and arrange for arrears to be paid. If the problem is longer term, for example due to a drop in income or a necessary regular expense, the Trustee can reassess the situation.
The Trustee may decide that an IPA/ IPO is no longer appropriate and you are therefore no longer be required to make payments. However if this happens you must inform the Trustee if your surplus income rises again before the end of the IPA/IPO. The IPA/IPO will end on the original date despite agreed reduced or suspension of payments.
If you miss payments, and do not contact your Trustee about any difficulties, the Trustee may apply to the court for an order suspending your discharge from bankruptcy. The Trustee can also take steps to recover the money you owe, including another bankruptcy order.
If you fail to make payments under an IPO, you are in contempt of court and the court may punish you accordingly.