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i England, Wales and Northern Ireland only

After bankruptcy

Bankruptcy and income payment agreements  

The official receiver may ask you to make payments after you go bankrupt. This is an income payment agreement (IPA).

The official receiver (OR) looks at your situation when you declare bankruptcy.

They look at:

  • Your income and spending
  • What you can afford to pay towards your debts each month
  • The costs of administering your bankruptcy

Any amount over £20 left after your monthly living costs goes into the IPA.

How does the Official Receiver work out what I can afford?

The OR compares your spending to a set of guidelines based on average household costs.

  • You need to explain if you have any high expenses
  • They ignore costs which they do not think are essential

For example:

  1. Let’s say you spend £100 per month on tobacco
  2. The official receiver will add the £100 to your monthly IPA payment

This may mean you cannot afford items the official receiver thinks are unnecessary.

The OR may ask you to pay extra if you are working because:

  • Your income tax for the remainder of the year stops
  • It only starts up again from the next April

You do not get to keep this tax. You must pay it to the OR.

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Where do I make IPA payments?

The OR employs a company of solicitors to operate IPAs. You usually make 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.

This means the latest your final IPA payment could be is just under four years after your bankruptcy order.

What happens to the money?

Your payments cover:

  • Payments to the people you owe
  • Some of the costs of administering your bankruptcy

The people you owe usually get a small portion of their debt repaid this way.

What if I do not pay?

The solicitor who collects your IPA payment will contact you if you miss any.

They could take court action if:

  • You do not catch up with payments or
  • You do not agree a payment change with them

The OR can apply for a court order to make you comply with IPA if you do not agree to it.

  • This is called an income payment order (IPO)
  • They are fairly rare

They can also take payments straight from your wages.

What if my situation changes?

Contact your OR and the solicitor if your income or living costs change.

They can adjust your IPA payments to make sure you can afford them.

Further court action can be take if you stop or reduce the payments without talking to them first.

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