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Can you keep a one off bonus or overtime payment?
If you earn overtime or are paid a bonus while you are bankrupt, you are obliged to tell the Official Receiver. They will decide whether you can keep this extra money or if you need to pay it to them.
Where the extra money is a one off payment and relatively small compared to your normal income, you will normally be allowed to keep it.
For example if your monthly take home pay is usually £1000 and you have a one off opportunity to earn an extra £100, there is generally no need to worry. It would be unlikely that you will be asked to give it up.
However, if the amount you receive is a larger payment such as a quarterly or annual bonus, it will be treated as a windfall. Generally speaking you will have to hand such sums over.
What if you earn regular overtime or commission while you are bankrupt?
Where you earn overtime or commission payments on a regular basis (for example every month or quarter), these must be declared to the OR. You should include these amounts when completing the income section of your application form.
Of course, the amounts you receive may vary. If you do regular overtime, it is normal that the amount will fluctuate each month. So what amount should you put down?
In these circumstances, it is best to use an average figure based on the amounts you have earned in the past 6 months. This will iron out any unusually good or poor months to give a sensible sustainable figure. If you feel your extra earnings are likely to fall in the future, use a lower figure. But be aware, the OR might ask for a review in 3-4 months time to confirm the figures are what you thought they would be.
If you earn more is your Income Payment Agreement paid faster?
When you go bankrupt, the official receiver reviews your income and expenses budget to see if you have any surplus income. If so you will have to pay this towards your debt in the form of an income payment agreement (IPA). The payments normally last 3 years.
The amount you are paying into an IPA can increase if your income permanently increases. This could happen if your regular overtime or bonus payments go up.
Where your payments increase, it is very unlikely that your IPA will be paid faster. It will continue for the remainder of the 36 months.
This is because the total the OR can collect is equal to the amount of debt you originally owed, plus their fees (normally at least £6000), plus interest charged at 8% per year from the start date of your bankruptcy.
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I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert