If I go bankrupt, will I have to pay anything towards my debts?
October 1, 2017
If you enter bankruptcy, you may need to pay a monthly amount from any surplus income that you earn, in addition to handing over your assets to the Trustee. This is to cover some of the costs of your bankruptcy, and increase the returns for your creditors by a small amount.
There is protection built in to these arrangements should you lose your job, however, or your earnings are reduced.
There are two types of income payment arrangement in Northern Ireland:
- Income Payments Order (IPO)
- Income Payments Agreement (IPA)
An income payments agreement is an arrangement between yourself and your Trustee, whereas an IPO is an order of the court.
How does an Income Payments Agreement work?
A bankruptcy order always takes into account the assets you might need to carry on your trade, or continue to work, so you can potentially add to the repayment of your debt over a period of time.
If you have surplus income after ‘reasonable living expenses’ are covered, you may be asked to contribute a monthly amount to repay your debts for a fixed duration. This is called an income payments agreement – it can commence at any time after your bankruptcy, but must not last longer than three years.
The IPA is usually administered by a firm of solicitors who collect the payments. If your earnings change you must not stop the payments without informing the solicitors or your Trustee, otherwise you may face further court action.
Calculating your contribution to an IPA
The figures used to calculate whether or not you can afford to repay in this way are based on the average living costs of a household. The agreement is flexible if your income fluctuates, and the Trustee can adjust your payments up or down accordingly.
The Trustee or Official Receiver will assess your income and regular expenditure to determine how much money you need to pay, if any. Certain costs considered non-essential may need to go towards paying your creditors. In the same way, if you’re in receipt of some benefits, they won’t be included in the calculation.
When is an Income Payments Order used?
If the Trustee is unable to reach an agreement with you regarding an IPA, they can apply to the court for an income payments order which forces you to contribute to your debts from your disposable income.
An IPO may remain in effect for up to three years following the date of the order, and can continue after you’ve been discharged from bankruptcy. Again, flexibility is built in to this arrangement to account for fluctuations in your earnings, and payment amounts can be increased or decreased if necessary.
For more information on entering bankruptcy, or to find out about paying regular amounts towards your debts, call our experts at Northern Ireland Debt Solutions. We’ll arrange a free same-day meeting to discuss your situation, and ensure you understand all your options.
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