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.
Included in this article:
- 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?
- Paying 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?
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 during the year, no further payments will be required.
That said, 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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20 thoughts on “Do I have to make debt payments if I go Bankrupt”
I’m starting a new job, my bankruptcy ends in September. In all homestly, I want to avoid an IPA, can the insolvency service make me claim universal credit on top of my salary so there would be disposable income available to pay towards this? With childcare, there’s not much income left
If your income goes up while you are bankrupt, you do have a legal obligation to tell the official receiver.
My advice would be to complete a new income and expenses budget for yourself first so that you give yourself a heads up as to what the potential change in your surplus income might be. Use your new take home income, any benefits income and revised childcare costs. If you currently receive Universal Credit, you can also use a benefits calculator to see how much this would reduce based on your new income.
If your surplus is still zero or less than zero, you have little to worry about as you should not get an IPA.
I can confirm that the insolvency service can’t make you claim Universal Credit. They might suggest it, but they can’t force you. As such, you should only consider this if your surplus is less than zero and you are going to be struggling.