What if my income changes while I am Bankrupt?

What if Income Changes during Bankruptcy If your income changes while you are bankrupt you must tell the Official Receiver (OR). They will assess whether the amount you pay towards your debts should rise or fall.

  • What if your income increases during Bankruptcy?
  • What if your income falls?
  • Will you have to hand over overtime or bonuses?
  • How often is your income reviewed?

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What happens if your income increases during Bankruptcy?

If your income changes for the better during your bankruptcy you have to inform the OR. They will ask you to provide a new income and living expenses budget.

If your disposable income has gone up you may be asked to increase the amount you are paying towards your debts.

If you already have an Income Payment Agreement (IPA) in place the amount you pay will be increased. If not the OR may require you to start a new IPA.

An IPA can be set up at any time during your bankruptcy. It will then remain in place for 3 years from the date it starts even though you are likely to be discharged in the mean time.

What if your income changes for the worse during Bankruptcy?

You must also inform the OR if your income changes for the worse. They will assess the impact on your disposable income to see whether it has fallen.

If your disposable income has gone down but you are not currently paying anything towards your debts then the change will make no difference. However if you have an IPA in place the payments will be reduced or stopped.

If your IPA payments are stopped the Agreement remains in place at a zero rate. If your income increases again within the three year period you may have to restart your payments.

How are overtime and bonus payments dealt with during bankruptcy?

Generally speaking overtime and bonus payments are not be used in the calculation of your normal monthly income. This is the case unless they are guaranteed or extremely regular.

However if you do get a bonus while you are bankrupt you have to inform the OR. They will then decide what should be done with the extra money you have received.

If the amount is minimal (perhaps just a few hundred pounds) you may well be allowed to keep it. However anything more will normally be treated as a windfall and will have to be handed over to the OR in full.

Most windfalls you receive after you are discharged from bankruptcy are yours to keep. This is the case even if you still have an Income Payment Agreement in place.

Will your income be reviewed before you are discharged?

The Official Receiver can ask you to provide up to date income and expenses figures at any time while you are bankrupt. If they do you must be honest and tell them about any increase in your income.

Where you are self employed you could be asked to provide new information every three months. You may also be contacted after 3 or 6 months if you were unemployed or on a low income at the time you went bankrupt.

If the OR felt you were likely to get a job within the next 12 months when they interviewed you they will record this on your file. A note will then be made to contact you to confirm whether this has happened or not.

The OR can ask you to provide a new income and expenses budget even in the last month of your Bankruptcy. If they establish you have disposable income an IPA can be still started and last a further 3 years.

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2 thoughts on “What if my income changes while I am Bankrupt?

  1. Tristan says:

    Hi, I have made myself bankrupt. It was only a matter of weeks before the inland revenue forced me into bankruptcy. I have shared equity in our house which has been calculated. I am Paying ex amount per month for a total of four years. How much can I legally earn per year before the amount I pay is recalculated and I have to pay more per month towards my bankruptcy.

    1. Hi Tristan

      There is no figure that you can earn up to before you income is recalculated and you have to pay more into your bankruptcy. If you have a permanent improvement in your income while you are in your IPA you must contact the Official Receiver and tell them. They will then send you a new income and expenditure budget to complete. If as a result of the increase your disposable income has gone up then your payments will also rise accordingly.

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