Income payment arrangements

An IPA is a payment plan where you put some of your income towards your debts for a set time.

Payments must be made from earned income, so you won’t be asked to make payments if your income is made up solely of benefits.

This only applies if you have money left over after paying for essentials, such as: 

• rent or mortgage payments
• utility bills (gas, electricity, water)
• groceries
• transport costs
• child maintenance
• reasonable personal spending, such as clothing

Payments in an IPA go towards the debts included in your bankruptcy and the cost of administering it.

You might still have to make payments to debts that can’t be included in the bankruptcy, like child maintenance arrears, court fines and student loans.

The official receiver - the person handling your bankruptcy - will look at your income and expenses.

They’ll then decide what’s considered a reasonable amount for your living costs.

They may be asked to reduce anything that’s considered high based on spending guidelines, and costs which aren’t considered essential, such as smoking, are likely to be disregarded.

You may then have to pay any money left over after that - anything over £20 - into an IPA.

We should stress that this can change over time.

So if your financial situation improves or gets worse, the amount you’ll have to pay will change accordingly.

The official receiver will appoint a third-party company to collect payments.

They’ll give you details on how to set up and make payments.

This could be through a standing order, direct debt or deductions from your wages.

If you miss a payment, get in touch with the company and let them know your circumstances.

An IPA usually lasts up to three years (36 months) from the date it’s set up.

It can start any time within the first 12 months following someone going bankrupt.

If your situation changes and you find yourself unable to afford the payments, you might be able to stop the arrangement.

Yes.

It’s vital that you tell the official receiver straight away if your income goes up or down.

They can then look at your IPA so the amount you’re able to pay can be changed.

You might also be able to pause payments if your situation changes temporarily.

Yes.

If you stop paying and can’t give a good reason, the official receiver can apply for a court order to enforce payments.

This is called an income payment order (IPO).

You might also face bankruptcy restrictions being extended beyond the usual 12 months.