What is an Income Payments Order?

July 26, 2019

When you enter bankruptcy, depending on your level of income, you may need to contribute a monthly amount towards your debts for a set period of time in addition to handing over your assets.

The Official Receiver (OR), or your Trustee if one has been appointed, will analyse your income and outgoings and if you do have residual money at the end of the month once essential living costs have been taken into account, they’re likely to request an Income Payments Agreement, or IPA.

If you don’t agree to make payments in this way the Trustee/Official Receiver can apply to the court for an Income Payments Order (IPO), which orders you to pay these contributions from your net weekly or monthly wage.

How is an IPO repayment amount calculated?

As you no longer have to pay creditors on an individual basis each month you’re available income will naturally increase, and this forms the basis for your IPO repayments. The Trustee will assess how much you can afford to pay taking into account reasonable living expenses.

So what types of expenditure are typically included in the calculation for an Income Payments Agreement/Income Payments Order?

• Food
• Heat and light
• Rent
• Clothing
• Water
• Council tax
• Travel costs

When the calculation is carried out a distinction is made between your ‘reasonable domestic needs’ and your ‘basic domestic needs.’ The order is not intended to create further financial distress – the premise behind it is to provide additional returns for your creditors, within reason and where possible.

If your circumstances change during the term of an Income Payments Order

An IPO can last for up to three years so it’s common for a bankrupt’s circumstances to change at some point during this term. Fortunately, an Income Payments Order can be changed to reflect this so if your working hours are cut, for example, or you lose your job, an application can be made to the court for the agreement to be varied or discharged.

If you enter self-employment the IPO may need to be amended to reflect the fact that your income isn’t as steady as if you were in employment, and if your only income is state benefits an Income Payments Order isn’t applicable.

What happens if you don’t pay an Income Payments Order?

An Income Payments Order is a legal agreement to pay the amounts stated, and is enforceable in law. If you don’t pay the IPO and you’re in employment, your Trustee may decide to apply for an Attachment of Earnings Order (AEO), which involves your employer deducting the amounts directly from your wages. You’re also likely to have your discharge from bankruptcy suspended if you don’t make your IPO payments.

For more information on Income Payments Orders, what they are, and how they might affect you, please contact one of our expert team at UK Debt. We specialise in helping people deal effectively with debt, and can offer reliable independent professional advice.

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