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After bankruptcy

Bankruptcy & income payment agreements  

In some cases, the official receiver who administers your bankruptcy might order you to make some payments after you’ve gone bankrupt.

This is known as an income payment agreement (IPA). In the last few years, IPAs have been applied to around 1 in 5 bankruptcies.

How are IPA payments worked out?

After your bankruptcy, the official receiver will thoroughly investigate your situation. They’ll look at your income and spending, and work out if you have anything left over each month which could be used to pay towards your debts and the costs of administering your bankruptcy.

The official receiver will compare your spending to their own guidelines which are based on average household costs. They’ll take into account your individual circumstances, so if you have any unusually high expenses you’ll need to explain these. If there’s more than £20 left over each month after your essential living costs, you’ll be instructed to pay this to the IPA.

If your income is solely made up of benefits or state pension, the official receiver won‘t normally set an IPA.

When the official receiver works out how much they think you can afford, they’ll ignore some costs which they don’t think are essential. For example, if you spend £100 per month on tobacco, the official receiver will most likely add the £100 to your monthly IPA payment. This may mean you can’t afford to keep paying for the items the official receiver thinks are unnecessary.

On the other hand, they’ll also overlook some income, so for example if you get disability living allowance (DLA) or personal independence payment (PIP), this won’t be taken into account when assessing how much you could afford to pay.

On top of this you may be asked to pay extra if you’re working because your income tax for the remainder of the year will stop, and only starts up again from the next April. You don’t get to keep the tax though - you must pay this to the official receiver as well.

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Where do I make IPA payments?

The official receiver employs a company of solicitors to operate IPAs. In most cases you’ll make the payments to them.

How long do I pay an IPA?

An IPA is set for a maximum of 3 years. It can start any time in the first 12 months following your bankruptcy, before you’re discharged. This means at the latest, your final IPA payment will be just under four years after the date of your bankruptcy order.

What happens to the money?

The payments you make are used to cover some of the costs of administering your bankruptcy, and to make payments to your creditors. Usually your creditors will only get a small portion of their debt paid back this way. 

What if I don’t pay?

If you miss IPA payments, the solicitor who collects them will contact you. If you don’t catch up with payments or speak to them to agree a change to the payment, they could take court action to get the missed payments from you.

If you don’t cooperate with the official receiver and agree the IPA, they can apply for a court order to make you comply with it. This is called an income payment order (IPO). They’re fairly rare with only a handful granted each month.

If you don’t pay an IPA or IPO, the official receiver or solicitor can take further action, including taking payments straight from your wages.

What if my situation changes?

If your income or living costs change contact your official receiver and the solicitor as soon as possible and let them know. Your IPA payments can be adjusted to ensure you can still afford them. 

If you stop or reduce the payments without first contacting the official receiver and solicitor there’s a risk that further court action could be taken to collect the payments you’ve missed.

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If you’re considering bankruptcy it’s important to get some proper advice about it first. Our online debt advice tool will let you know if bankruptcy is suitable for you and will recommend alternative solutions if they’re available.