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What is a bankruptcy Income Payment Order?

What is a bankruptcy Income Payment Order?

Sections 310 and Sections 310A of The Insolvency Act 1986 concern the bankruptcy surplus income. You can find bankruptcy Income Payment Order treatment in The Insolvency Rules 1986 under Rule 6.189 to Rule 6.193C. 

When you get a bankruptcy order from the court, you do not have to make further payments to your existing debts. As such, you might have more than sufficient funds with you after tending to your household necessities. However, even if you face bankruptcy, it is only fitting that the creditors receive a part of the debt money from you, if applicable. 

That condition indicates that you must make minimum repayments to your creditors if you are left with enough high funds. This bankruptcy term arises under the Income Payments Agreement (IPA). If you do not want to repay the creditors, you disagree with IPA, and the court will stamp upon you a Income Payment Order (IPO)

bankruptcy Income Payment Order

The Income Payments Agreement and bankruptcy Income Payments Order are more or less the same. The only difference lies in the need for the debtor’s consent. When you face bankruptcy, you get a bankruptcy trustee. To put an IPA into force, the trustee would want your consent on the matter. But with the bankruptcy IPO, the trustee can obtain an IPO without your permission. This means you have to make regular payments to the trustee through a voluntary agreement in an IPO. 

Now, if you are wondering what is bankruptcy Income Payment Order (IPO), below is a small guide to help you understand the term better. 

Bankruptcy Income Payment Order (IPO) – How does it work?

When you don’t agree to make regular payments to the bankruptcy trustee from your available funds under the Income Payments Agreement (IPA), the bankruptcy trustee has the right to obtain a Income Payment Order (IPO) from the court without your agreement. That is, whether you agree or not, you have an obligation to make regular payments to the trustee as a contribution towards your debt. 

The Income Payment Order is applicable only if you are bankrupt and have a disposable income of no less than £20 a month after deducting your necessity bills and household living expenses, provided that you disagreed with the Income Payments Agreement. On the other hand, if you have no reliable income source and are only receiving sufficient benefits, the IPA or the Income Payment Order will not be imposed by the court. 

Therefore, unless you apply to those conditions, you do not have to think about “what is bankruptcy Income Payment Order?”. 

Terms of a bankruptcy Income Payment Order (IPO)

The bankruptcy trustee cannot impose a bankruptcy Income Payment Order on every bankrupt. But if an IPO is obtained under your name, you have to follow some standard and official terms. The terms state as:

  • The Income Payment Order cannot be longer than a three-year duration, although it is extendable with change in the bankrupt’s conditions. 
  • You are expected to make a monthly payment of at least £20. 
  • Changes in your financial circumstances can alter the Income Payment Order. 
  • Rather than a monthly payment, the bankruptcy trustee might want you to make a one lump sum payment if the situation permits. 
  • If you agree to/and do not violate the Income Payment Order terms, there is no need for you to present the court. 

Terms as to when a bankruptcy trustee can apply for an IPO to the court

There is a condition when a bankruptcy trustee can apply for a bankruptcy Income Payment Order under your name. A bankruptcy trustee is liable to apply for an IPO only if any of the conditions meet:

  • The debtor/bankrupt is not appointed an Insolvency Practitioner after the first meeting. 
  • Or when a “No Meeting Notice” is issued after the first meeting. 
  • And when the debtor/bankrupt refuses to agree to the Income Payments Agreement (IPA). 

After a bankruptcy Income Payment Order has been obtained, you will get about 28 days’ notice to confirm your decision. In these 28 days;

  • If you agree to the bankruptcy Income Payment Order, you won’t have to appear for a court hearing.
  • If you disagree with the bankruptcy Income Payment Order, you have to appear for a court hearing and present your reasons for opposing the IPO.  

Assessing your bankruptcy Income Payment Order 

In a standard case, you are expected to contribute monthly payments to the bankruptcy trustee, providing that your disposable income after bankruptcy is no less than £20. The bankruptcy trustee can obtain an IPO only if it is found that you have a monthly surplus income exceeding £20. This depicts that if your disposable income after taking care of monthly essential bills amounts to £20 or higher, the more you have to attribute to the bankruptcy trustee. 

Here, the disposable income is identified as the leftover or available money after deducting all the monthly living expenses and necessary household bills. When applying for bankruptcy, you fill in your details and other information in a Statement of Affairs form. And after bankruptcy, you again have to fill out the Preliminary Information Questionnaire form. This final form lets the bankruptcy trustee know about your monthly surplus income. 

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The general living expenses considered to assess your monthly surplus income after bankruptcy include:

  • Rent and mortgage payments
  • Household insurance
  • Car insurance and tax
  • Medical prescription, opticians’ fee, and dental treatment
  • Mobile phone expenses
  • Food and lighting
  • Broadband service and TV license
  • Council tax
  • Electricity and gas bills
  • Child maintenance order
  • Pets expenses, if any.
  • Extra-curricular activities of the child
  • Holidays, etc

Other unreasonable expenses that are not considered to assess your bankruptcy Income Payment Order include:

  • Private health insurance
  • Club, sports, and gym memberships
  • Charities 
  • Gambling, cigarettes, or alcohol expenses
  • Contributions towards private pensions
  • Excessive mortgage fundings

Nonetheless, after assessing your reasonable expenses, if it is found that your source of income is the state security benefits, you won’t be expected to accept the Income Payments Agreement or the bankruptcy Income Payment Order. The court and the trustee cannot demand you agree to an IPO unless you have sufficient monthly surplus income. 

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