Money Advice, Debt Advice & Debt Help
Do I have to make debt payments if I go Bankrupt
Money Advice, Debt Advice & Debt Help

Do I have to make debt payments if I go Bankrupt

Do I have to make debt payments if I go Bankrupt

You may be required to make ongoing debt payments after you go Bankrupt. Whether this is the case will depend on whether you have any disposable 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?

When you go Bankrupt your unsecured debts are taken away from you. However if you have disposable income (also called surplus income) you will still have to pay this towards your debts in the form of an Income Payment Agreement (IPA).

If you are asked to pay an IPA the payments will last for 3 years. As such you will continue paying after your formal bankruptcy period is over. At the end of the three years the payments stop and you are then free of your debt.

If you have zero 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.

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

  1. Sally says:

    Hi

    I have a quick question about the bankruptcy income and expenses that I’m wondering if you can help with?

    Basically I’ve done household expenditure and then things like fuel/hair/mobile phone- all just for me not my partner. Then it asks me for my partners income. Should I put down his total income or just his contribution to household bills?

    If I put his income, but haven’t added in his personal debts & phone bill etc, then it will look like we have a big surplus when we haven’t? Or do I put down his income & then explain to the OR in the interview?

    Many thanks

    1. Hi Sally

      When you are completing a BK application form you need to do a household income and expenses budget. In other words you must include both your full income and your partner’s full income. Then in the expenses you include all the household expenses including your partner’s personal expenses (mobile, travel costs, housekeeping etc). The only thing you do not include is his debt payments.

      Then you calculate the household disposable income (deduct the total expenses from the total income). This total surplus is then divided between you and your partner as a percentage of the income you both contribute. As such if you both contribute 50% of the income the surplus is split 50/50. Your share will have to be paid into the bankruptcy in the form of an IPA (as described in the above article).

      Your partner keeps his share. He can do what ever he likes with this. If he has his own debts to pay then he can use this to pay these.

  2. Tony says:

    Hi

    A friend of mine is facing bankruptcy. He has a Divorce Court maintenance order in place to his ex wife and children from February 2018 for £1300/month out of his total net monthly income of £3900/month. The Divorce order will be ongoing for at least 4 years at this rate due to age of children.

    He has no assets and lives in rented accommodation with new partner with child. After the , after the maintenance payment ,rent and household costs and using guidelines on expenses provided by this site he has no surplus monies.

    Debts were incurred primarily before February 2018 and total £85000 to 6 credit card companies and banks. Overspending the cause.

    It is being suggested that the existing Court Order could be challenged? Is that correct and do you think it likely? If it was challenged on what grounds?

    1. Hi Tony

      If your colleague goes Bankrupt in my opinion the Official Receiver will not challenge a court order for maintenance. Clearly if the Order did not exist the OR would have potential scope to then ask for an income payment from your friend. However in my experience they will not try to challenge a maintenance order already issued by a divorce court.

      As such I believe the order would still have to be paid each month and if there is no surplus income as a result your friend would not have to make any further payments towards their debts. They would be discharged after 12 months and their debt written off.

      If you or they would like addition information or assistance with a bankruptcy application please do not hesitate to contact me (0800 077 6180).

  3. Tanya says:

    Hi James

    I am just a little confused as to what to put on the expenses part of my Bankruptcy application. My husband earns roughly £2000 and I earn £1500. We have always however split our living expenses 50%. Is this still the case when I go bankrupt as I wouldn’t be able to say to him here is my rent but suddenly its less…

    I am ready to press send on my application but just wanted to be sure…

    Thanks!

    1. Hi Tanya

      When you complete your income and expenses budget in the bankruptcy application you must use household income and expenses figures. In other words you include both you and your husband’s income. In the expenditure section you include 100% of all the expenditures. This way a household surplus can be calculated.

      That surplus is then split between you and your husband based on the percentage of the income you both contribute. So given you contribute approx 40% of the income and your husband contributes approx 60%, 40% of the surplus is allocated to you and 60% to your husband. He would keep his 60% and your 40% would have to be paid towards your debts in the form of an income payment agreement (IPA).

  4. Sean Smith says:

    Hi,

    My partner earns very little, she pays for some of our bills and has very little left afterwards. Some months I’ve had to pay some of her bills etc. Will the O.r take this into account? Will they ask for her bank statements etc too?

    Many thanks

    1. Hi Sean

      If your partner has a very low income it is unlikely she will have to make payments towards her debts if she goes bankrupt. The income and expenses budget on her application still has to be completed with care. But done right there should be no problem. It is very unlikely she will have to provide bank statements but it is possible.

  5. Denis says:

    I owe over £18000 i have had my house reposessed. I want to go bankrupt . when i do my income and out goings without paying any of my debts I have £180 left over . this doesnt cover anywhere near what I owe. will they let me go bankrupt

    1. Hi Denis

      The fact that you have surplus income does not prevent you from going bankrupt. Far from it. Your application would be accepted if it were submitted.

      Just remember that the official receiver will review your income and expenses. You will be required to pay any agreed surplus towards your debts for 3 years in the form of an IPA. You are right these payments will not cover the debt you owe. Any debt outstanding is written off. You are no longer liable for it.

  6. Sharon says:

    Hi,

    I am thinking of going bankrupt. I am a part time worker and get UC. I work bank work as i care for my daughter as she in receipt of pip. What is the likely hood of me having to pay monthly towards these debts and if so how much roughly for income of 16000 with benefits? My debt is 12500

    1. Hi Sharon

      If you go bankrupt whether you will have to make ongoing payments towards your debt is not related to how much income you have each month. It is based on whether you have any surplus. Where you have surplus income this is the amount you have to pay. As highlighted in the article above, your surplus income (also called disposable income) is calculated by deducting your total living expenses from your total income.

      From what you have said it looks as though your income including your Universal Credit is relatively low. As such I would be surprised if you had any surplus income at all at the end of the month after taking into account all your expenses. If this is the case you will not have to make any ongoing payments at all if you go bankrupt.

      I assume you live in rented accommodation? If so and because your debt is less than £20,000 I suggest you also consider the option of a debt relief order. This will give you exactly the same outcome and benefits as going bankrupt but will only cost £90 to implement.

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