If you have been declared Bankrupt you may have to make a monthly payment towards your debt for three years. This is known as an income payment agreement (IPA). You will be asked to make this payment if the Official Receiver (OR) believes that you can afford to do so.

The OR will make their decision based on how much disposable income they believe you have. This is the money you have left over each month from your income after all of your reasonable living expenses have been taken into account. If you are living in England or Wales you will normally be asked to pay all of your disposable income towards your debts.

We explain what you can do if you are asked to make a payment each month which you cannot afford or if your circumstances change meaning your payments are no longer be affordable.

Is your Bankruptcy expenses budget correct?

If you have been asked to pay a monthly payment amount that you feel you cannot afford one of the main reasons for this is that you may have given the official receiver incorrect information about your living expenses when you originally completed your Bankruptcy application form.

The section in the application form concerning your living expenses is easy to get wrong. There are a limited number of specific expenses stated but there are not boxes for all of the possible expenses you will have to pay each month. Instead you are asked to include any other living expenses in a catch all box called “other essential payments”.

If you did not take advice when completing your application form it is likely that you have not included a comprehensive list of your living expenses in this section. Your overall living expenses figure will therefore have been much lower than it should have been and it is likely that the official receiver believes that you can pay more than is really possible.

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How to revise your Bankruptcy living expenses budget

It is absolutely vital to ensure the information that the OR has about your living expenses is correct. If you feel that the information you gave when you completed your application form is incorrect you should ask them to allow to you re-submit your budget.

Once your revised budget has been submitted if the expenses that you missed the first time round are reasonable then it is likely that your disposable income will be changed and you will be allowed you to pay less each month based on the better reflection of what you can afford.

Have your circumstances changed during your Bankruptcy?

One of the other reasons why you may find you are struggling to pay your IPA is that your financial circumstances have changed and you can no longer afford the payments.

It is highly likely that over the three year period that you are required to make the payments you may experience a reduction in income or your expenses may increase. If and when this happens you must get in touch with your OR straight away and ask to submit a revised income and expenditure budget.

The Official Receiver will review the changes and decide whether it is reasonable for your payments to be reduced. Generally speaking if you have had a clear reduction in your income or a significant change to your living expenses they will be sympathetic to your situation and allow a reduction in your income payments.

BMD Tip: If you are struggling with your payments simply because the cost of living has increased this may be a more difficult argument to win with your OR.

Do not be afraid to speak to the Official Receiver

To avoid the stress and hassle of trying to pay an income payment agreement that you cannot afford it is vital that you submit a correct expenditure budget with your Bankruptcy application. If you are unsure how to do this you should get advice before completing the application form.

However you have already been asked to pay an amount that you cannot afford and believe you did not give the the correct information to begin with the most important thing to do is speak to your OR and ask them about re-submitting your living expenses budget. In the same way if your circumstances have changed, you need to speak to the OR straight away.

Very often people who are bankrupt are scared to contact the official receiver. However you should not worry and if you have legitimately given incorrect information or your circumstances have changed. The OR is there to help you resolve the problem and you should not delay contacting them.