Changes to Income Payments Orders
Changes to Income Payments Orders
If you go bankrupt in England and Wales, one of the aspects of your life that the Official Receiver looks at is whether you have any excess income left after you have spent the money coming into the house. If you do the OR can ask you to pay that to him as an Income Payments Agreement. If an agreement cannot be reached, the OR has the right to take the matter before a Judge and if the Judge agrees, he will make an income payments order.
The way that the OR has come to a determination about the amount of money available to him has just changed as from 1st December.
The changes are not retrospective and so they will not affect any Income Payments Orders IPO's or IPA's already in place.
Prior to 1st December 2010 the first 100 of any surplus income that a bankrupt had in his estate would be exempt from an IPA from the OR. Any money over and above this would then be taken on a sliding scale from 50%-70%.
With the changes only the first 20 will be discounted and after that 100% of any surplus will be taken towards the IPA/O.
This is quite a significant change. It means that prior to 1st December if there was a surplus of 400 (not likely I grant you, as you could probably afford your debts at this level), then an IPO/A would be put in place for 260.
Under this new system if there were to be a similar sum as surplus then the IPO/A would be put in place for 380.
I suspect that this has been done for two reasons:- Firstly the Insolvency Service has to be self funding if possible. In the past they have been able to rely on property realisations to provide assets from which they could take their fees. Now with many properties having no equity, this is not bringing in the needed revenue. Changes to the way that IPO/As are calculated could redress this. Secondly, the sums demanded from debtors in an IVA leave no room for surplus income and so this new regime brings the two systems nearer in line.
Whilst the changes may seem draconian it must be remembered that the IPA lasts only three years, and not five or six under an IVA and the allowances that you can offset against your income are much more generous. You can for example set aside money for a holiday under bankruptcy, but you cannot in an IVA.
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