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Do I have to make debt payments if I go Bankrupt

Do I have to make debt payments if I go Bankrupt

Do I have to make debt payments if I go Bankrupt

You may not have to make any further debt payments after you go Bankrupt. Whether you do or not depends on whether you have any surplus income.

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How much will I pay each month if I go Bankrupt?

If you go Bankrupt you still have to pay towards your debts if you can afford to do so. What happens if you cannot afford to make monthly payments? How long will any payments you have to make last? To find out more please visit: http://beatmydebt.com/bankruptcy-frequently-asked-questions/do-i-have-to-pay-towards-my-debts-if-i-go-bankrupt

Will you have to pay towards your Debts once Bankrupt?

If you have no surplus income, you will not have to make any payments towards your debts after you go bankrupt. This is one of the major advantages of the solution. As long as your income does not improve while you are bankrupt no further payments will be required.

However, where you do have a surplus income, you will have to pay this towards your debts. The payments will last for a maximum of 3 years. After this time the payments stop and any debt still owed is written off.

When you do have to make payments towards your debts, this is known as an IPA (Income Payment Agreement). If your income falls while it is in place, your payments are reduced or stopped altogether. In the same way, if your income improves your payments may have to increase.

If you receive a bonus payment or earn significant extra overtime during an IPA you must report this to the Official Receiver. They will normally take this money from you in addition to your standard monthly payment.

What happens to your Debt Payments if your Circumstances change?

If your financial circumstances change while you are bankrupt you are legally obliged to inform the OR. They will then re-assess your disposable income and determine whether there is any change.

If there is a change and you are already making IPA payments these will either increase or decrease accordingly. Where your disposable income increases and are not already making payments it is likely that these will start.

If you are required to start an IPA part way through your bankruptcy it will still last for three years. You will still be discharged in the mean time but the payments will continue for the full 36 months.

A IPA can be put in place at any time before you are discharged. However if it has not happened by the time you are discharged it will never happen. Any extra you earn after this time is yours to keep.

Do you have to make Debt Payments if you are on Benefits?

There is nothing to stop you going Bankrupt if you are receiving Benefits. If they are your only source of income it is very unlikely that you will be asked to make any further debt payments.

The benefits you receive are calculated to cover only your essential living expenses. They are not designed to allow you to repay debt on top.

Having said that if you are working and receive tax credits in addition to your wages your total income will be taken into account. If you have any disposable income in these circumstances you might be required to start an IPA.

If the benefits you receive are great enough to provide you with disposable income you may be required to make debt payments if you go Bankrupt. However it would be unusual.

Paying debts not included in your Bankruptcy

Most if not all your unsecured debts will be included in your bankruptcy. However some debts are not included and still have to be paid.

A good example of these are mortgages and other secured loans. However they also include CSA arrears, Court fines (such as speeding tickets) and Student Loans Company debt.

A sufficient amount must be included in your living expenses budget to allow you to cover these payments.

You will be personally liable for any debts that you incur after the date you are declared bankrupt. You will have to pay these in full.

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    18 thoughts on “Do I have to make debt payments if I go Bankrupt

    1. Lina says:

      Hello,

      What happens if your financial situation changes, do the payments you make in the 3 years adjust accordingly?

      1. Hi Lina

        I confirm that if your income changes during the 3 years of an income payment agreement, your payments can also change. If your income goes up the payments can go up. If your income falls the payments will reduce.

    2. AndrewP says:

      I went bankrupt on 15/03/21, and I am self employed (new UTR). Can I purchase training as a legitimate business expense to keep my earnings lower so I can avoid a IPA?

      1. Hi AndrewP

        If you are self employed, the monthly income figure you use in your bankruptcy income and expenses budget should be an average of your drawings from your business after expenses and provision for tax. Depending on the nature of the work, it is possible to add a provision for training as part of your business expenses. However the amount would need to be reasonable and justifiable.

        Please give me a call at Beat My Debt if you want to discuss this in more detail (0800 077 6180).

    3. Tammy says:

      Hi I have an appointment with an ipa assessor can I stop the maintenance payments I recieved for my two boys it’s £490 I’d rather their dad kept the money to spend on them rather than it be taken from them after all my mistakes are not their fault

      1. Hi Tammy

        If your sons’ Father was to stop paying you maintenance your income would fall. The IPA assessor would no longer be able to take that income into account until such time as the payments start again. As such, if the Father is able to stop making the payments (ie they are made privately rather than through the CSA) there will be little the IPA assessor can do about it.

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