If you get a pay rise during bankruptcy you must tell the Official Receiver. You may or may not be able to keep the extra money depending on your situation.
- What to do if you get a pay rise during Bankruptcy
- Can you keep the extra money you receive?
- What if you already have an IPA?
- The effect if you are already discharged
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What to do if you get a Pay Rise during Bankruptcy
If you get a pay rise while you are Bankrupt you are legally obliged to inform the Official Receiver (OR) within 21 days. They will then review your circumstances to see if you can afford to pay anything towards your debts.
You will be asked to complete an IPOQ (Income Payment Order Questionnaire). This will require details of your new take home pay and all other income you receive. You will also have to list your living expenditures.
The OR will assess the information you submit and determine if you have any disposable income. If you do you will be asked to start an Income Payment Agreement (IPA).
The OR can ask you to complete a IPOQ at any time during your bankruptcy. If your circumstances have not changed simply re-submit the information you provided in your original application.
Can you keep the extra money you receive?
The extra money you earn as a result of your pay rise is not just taken from you. Payments towards your debt will only start if you now have disposable income (also known as surplus income).
Disposable income is the amount left over from your income after your reasonable living expenses have been deducted. Given this when completing your IPOQ you must also include any changes in your expenses which are a result of your pay rise.
For example if you are returning to work after maternity leave it is likely you will have increased childcare costs. If your job has changed your travel expenses may have gone up.
The increases in your living expenses may actually cancel out the extra money you get from your pay rise. If this is the case you will not have to pay any more towards your debts.
What if you already have an Income Payment Agreement?
If you get a pay rise while you already have an Income Payment Agreement in place you are still obliged to inform the OR within 21 days. In the same way as if you were not currently making payments they will ask you to complete a new IPOQ.
Where your disposable income has gone up as a result of your increased salary your IPA payments are also likely to rise.
An increase in your IPA payments does not reduce the number you have left to pay. You are still required to make 36 payments overall. It simply means the amount you pay towards your debts goes up.
The effect of a Pay Rise if you are already Discharged from Bankruptcy
An Income Payment Agreement cannot be introduced after you have been discharged from bankruptcy. If you do not have an IPA in place by this date and subsequently get a pay rise you can keep all the extra money you earn.
However where an IPA has already been set up you must continue to inform the OR of any changes to your financial circumstances. This is the case even after the date of your discharge.
You will be asked to sumbit a new IPOQ and if your disposable income has increased your payment will also increase by the same amount.
If you are in an IPA you must continue to inform the OR of any changes in your income until the end of the payment agreement. This will be 3 years from the date it started.
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