Debt Payments during Bankruptcy
You may have to continue making debt payments after you are bankrupt. It will depend on your disposable income.
- Will you have to continue making debt payments?
- Do you have to pay if you are on Benefits?
- Does your Partner have to pay your debts?
- What if your income changes?
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Will you have to continue making Debt Payments after you are Bankrupt?
Once you are bankrupt the Official Receiver (OR) will carry out a review of your income and living expenses. They are looking to see if you have Disposable Income.
This is any money you have left over after all your reasonable monthly living expenses are accounted for. If you do you will be required to pay all of it towards your debts for three years in the form of an Income Payment Agreement (IPA).
If you refuse to make the payment requested the Court will intervene. Where they believe your disposable income calculation is correct you will be forced to pay with an Income Payment Order (IPO).
Where you have no disposable income you will not have to make further payments towards your debts. However you may have to start an IPA if your income improves before you are discharged.
Do you have make Debt Payments if you are on Benefits?
There is nothing to stop you going Bankrupt if you are on benefits. However you must still declare all your monthly benefits income on your application form.
Where your only source of income is benefits the OR will automatically assume that you have no disposable income. In these circumstances you will not be asked to make any further payments twards your debts.
If you or a family member receives DLA or PIP you should include this in your income figures. However also include an equivalent amount in your living expenses for “Disability Payments” thus cancelling the income out.
If your income is made up of a combination of benefits and wages it is possible you will have some disposable income. In these circumstances you may have to start an IPA.
Does your Spouse or Partner have to pay your Debts?
If you are living with a Spouse or Partner they are not responsible for paying your debt. However you must declare their income and living expenses on your application form. This allows the OR to calculate the full household disposable income.
Where there is none you will not be asked to make further payments. Any positive figure is split proportionally between you and your partner relative to what you contribute towards the income. You will have to pay your share into an IPA.
For this reason if you live with a partner it is critical that you complete your household living expenses correctly on your application form.
If you need help completing your household income and living expenses contact use about our Bankruptcy Assistance Service.
What if your Income changes while you are Bankrupt?
If your income improves while you are bankrupt you must inform the Official Receiver within 21 days. They will then ask you to complete a new income and expenses budget so your disposable income can be recalculated.
Where your disposable income has gone up any payments you are already making towards your debts will increase accordingly. If you do not already have an IPA it is likely that you will now be required to start one.
In a situation where your income falls you do not need to inform the OR unless you already have an IPA. If you do then your payments will be reduced or even suspended in accourance to your revised disposable income.
Once an IPA is in place you must inform the OR of any income changes that happen at any time during the 3 years it is running. Not just while you remain bankrupt.
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