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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- 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?
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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