Income payments agreement

An income payments agreement is a binding agreement between you and your trustee that you will make contributions towards your bankruptcy debts and costs for a maximum period of 3 years.

This means, depending on your income and expenditure assessments, you may be repaying some of your bankruptcy debts and costs for 3 years. It is important that you know how this works before you go bankrupt.

The agreement must be made prior to discharge from bankruptcy. If you decline to accept the income payments agreement then the trustee may apply to the court for an income payments order. Either you or the person who pays you will then have to make payments to the trustee.

As discussed above, you should know whether or not to expect an income payments agreement and its effect before going bankrupt.

How much of my income will be claimed?

Before the 01 December 2010 you would have been be expected to pay 50% - 70% of your surplus income after meeting the reasonable domestic living needs of you and your family. To put it another way, approximately 50% - 70% of your real disposable income. From the 01 December 2010 onwards you will be expected to pay all of your disposable income, that is 100%.

Note: It is the trustee that will determine your real disposable income.

Income payments agreement - expenses

Each bankrupt is assessed on a case by case basis and the expenses that you are allowed can often depend on the assessor, although each assessor does have guidelines to follow.

Living expenses such as rent, food, bills are allowed though there will be limits. Expenses such as smoking, gym membership and alcohol are not allowed. In some instances expenses that are usually disallowed may be allowed, it will depend on your circumstances.

For a definitive answer you should seek advice before entering bankruptcy.

Are my allowances negotiable?

In essence your allowable expenses may be negotiable depending on your circumstances but each one will need to be justified.

Will I get an income payments agreement?

That depends on your income and expenditure, which may be assessed at various stages throughout the bankruptcy process. If an assessment shows there is excess income after covering the reasonable domestic living needs of you and your family then an income payments agreement may be requested.

An income payments agreement will not usually be sought if your only source of income is state benefits.

When is income and expenditure assessed?

When you complete the statement of affairs form you detailed your income and expenditure. This will be used during the Official Receiver interview to establish if an income payments agreement is appropriate at that stage.

Following this your income and expenditure will be assessed during the early discharge process.

Can I refuse an income payments agreement?

Yes you can but in this instance the trustee may well apply to the court for an income payments order to be made against you.

Can the income payments agreement be varied?

The initial agreement may be variable in nature so you may be able to vary the amount that you pay without the need to go to court.

You or the trustee can also apply to the court to have the agreement varied if the other party is not co-operative and the grounds exist.

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. For more information go to the income payments order page.