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What if my income changes while I am Bankrupt?

What if my income changes while I am Bankrupt?

What if my income changes while I am Bankrupt?

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.

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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.

Where your disposable income has gone up one of two things could happen. If you do not already have an Income Payment Agreement (IPA) in place, you may be asked to start one.

If you are already paying an IPA, the amount you pay each month could be increased.

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. You are likely to be discharged before the end of the payment period.

What if your income falls 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.

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

If your payments are stopped the IPA will remain 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?

Overtime and bonus payments are not normally used in the calculation of your 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 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. However if you are paying an IPA you still have to report any extra bonus or overtime payments to the OR while this is in place.

How often is your income 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 employed and your income is unlikely to change the OR may not ask you for any updates at all. If you are self employed it is likely that you will be asked to provide up to date income and expenses information at least once during your bankruptcy (normally within the first 3-6 months).

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 at that time an IPA can be still started and last a further 3 years.

If you have been issued with an IPA you must inform the OR if your income improves at any time during the 3 year payment plan.

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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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