What is an Income Payments Agreement?
An income payments agreement is a written agreement between the trustee (or the official receiver) and the bankrupt. It is a binding agreement that states the bankrupt, or a third party, will make payments into the bankruptcy estate for a specified period of time.
If you have any questions about an income payments agreement or an income payments order then please feel free to ask (ask piggy).
The agreement must be made prior to discharge from bankruptcy and cannot last longer than three years from the date that the agreement is made.
The amount that is to be paid under an income payments agreement depends on the bankrupts income and expenditure, which may be assessed more than once during the bankruptcy. The first will take place at the beginning of the process and there may be further assessments if for example early discharge is initiated.
Who is an income payments agreement for?
To assess the bankrupts ability to contribute to the bankruptcy debts an income and expenditure questionnaire will be requested. If an assessment of this questionnaire shows there is excess income after covering the reasonable domestic living needs of the bankrupt and his/her family then an income payments agreement may be requested.
An income payments agreement will not usually be sought if the bankrupt's only source of income is state benefits.
What expenses am I allowed?
Each case is should be considered on it's own merits. If there are any contentious points then the official receiver will raise them with you. It may be that you have not made enough allowances for expenditure or that you have been over ambitious with the amounts.
The following expenses are generally allowed but remember each case is individually assessed:
- TV and video hire - one set per household
- Holiday (£60-£80pm for family of four)
- Clothes (Amounts above £40pm for individual, £80 pm for family will need explaining)
- Hairdressing (£10pm adult, £3pm child)
- TV licence
- Household and car insurance
- Dry cleaning
- Mobile phone - costs must be reasonable
- AA/RAC or similar membership
- Car tax
- Prescriptions/dental treatment/opticians
The following expenses are generally NOT allowed but remember each case is individually assessed:
- Gym membership
- Any sports expenses or club membership
- Satellite TV
- Broadband internet costs (unless shown to be necessary for the bankrupt's paid employment)
- Private healthcare insurance
- Additional pension contributions to enhance a pension
What is classed as income?
Generally speaking all income will be included when considering if an income payments agreement is appropriate.
If there are people living with you who are earning then it will be expected that they contribute to the household expenses in some way.
How much of my income will be claimed?
Generally speaking the higher your surplus income the higher the percentage of that surplus you will be expected to contribute. You will usually be expected to contribute between 50% and 70% of your surplus.
Can an Income Payments Agreement be Changed?
The IPA can be variable by nature. This means that if your circumstances change during the term of the agreement, then the amount you are expected to contribute may be increased or decreased accordingly. If you believe that the IPA you have in place needs to be changed, then you should raise this with your official receiver.
Discharge from bankruptcy has no effect on an IPA, however the agreement must be made prior to discharge.
What is an Income Payments Order (IPO)?
An Income Payments Order may be sought through the court if the bankrupt does not agree to the income payments agreement.
