You may be required to make ongoing debt payments after you go Bankrupt. Whether this is the case will depend on your disposable income.
- Will you have to pay towards your debts once Bankrupt?
- What if your circumstances change?
- Do you have to make payments if you are on Benefits?
- What happens to debts not included in your Bankruptcy?
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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?
When you go Bankrupt your unsecured debts are taken away from you. However you may still have to make some ongoing payments towards them. The amount you have to pay is based on your disposable income.
If you have disposable income the Official Receiver (OR) will normally require you to pay all of it towards your debts each month. This is called an Income Payment Agreement (IPA).
Once an IPA is in place the payments last for 3 years. As such you will continue paying after you are discharged from bankruptcy. At the end of the three years the payments stop and you are then free of your debt.
If you have no disposable income you will not be required to make any more debt payments. Given your circumstances do not change your debt will be written off after you are discharged.
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 ear 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.
What happens to any Debts that are not included in your Bankruptcy?
Most if not all your unsecured debts will be included in your bankruptcy. However secured debts are not. You must continue making your debt payments towards these things which would include a mortgage or secured loan.
In addition you have to continue paying priority debts such as your council tax and utility bills. A sufficient amount must be included in your living expenses budget to allow you to cover these.
Other debts which you must continue to pay include child maintenance, Court fines such as speeding tickets and Student Loans Company debt.
Any debts that you accumulated after the date you are declared bankrupt are not be included. You are personally liable to pay these.
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