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Income Payment Agreements & Orders (IPAs / IPOs)

Further Information

Resources

What is an Income Payments Agreement (IPA) and Income Payments Order (IPO) in bankruptcy?

The law (section 310A of the Insolvency Act 1986) allows the Official Receiver or trustee in bankruptcy to ask you (the bankrupt) to agree to make regular payments from your income into the bankruptcy estate for a specific period of time (this is usually for 3 years).

Both an Income Payments Agreement (IPA) and Income Payments Order (IPO) require you to make payments towards your bankruptcy debts from your income, if you can afford to. The Official Receiver considers your monthly household income and expenditure when deciding whether you can afford to make payments

An IPA can be agreed early in the bankruptcy proceedings as the Official Receiver can set up the agreement and start collecting payments before a trustee is appointed. The legislation provides for the IPA to be agreed between the bankrupt and the Official Receiver or between the bankrupt and the trustee.

An IPA will be made if the level of the payments can be agreed. If an agreement cannot be reached the trustee can apply to the court for an Income Payments Order (IPO).

Official Receiver guidance would suggest that an agreement will always be sought in preference to a court order.

IPA & IPO guide from gov.uk

IPA/IPO Expenditure Guideline Tables (April 2012)

The table below taken from the Insolvency Service Technical Manual provides guidance as to what may be considered an appropriate amount in order to meet the reasonable domestic needs of a bankrupt and their family.

Assessment of Income & Expenditure for IPAs / IPOs

When completing the online bankruptcy application all details of income and expenditure will need to be provided in the relevant sections.

The above information will be used by the Official Receiver for income and expenditure assessments in relation to potential and proposed Income Payment Agreement / Income Payment Orders.

Any proposed Income Payment Agreement / Income Payments Order will depend on deemed disposable income after 'reasonable' domestic expenses / needs are taken into account.

'Reasonable' does not mean basic and what constitutes 'reasonable domestic needs' will depend on the particular circumstances of each case.

Official Receiver Technical Manual guidance at 31.7.24 says:

"Whilst the assessment of income and expenditure with regard to obtaining an IPA/IPO is intended to provide a return to creditors where possible, it must also be remembered that the bankruptcy legislation is intended to provide the individual with an opportunity to start afresh and remain solvent in the future, so his/her expenditure should not be cut to level where he/she will have difficulty funding his/her reasonable domestic needs."

(If you are struggling to manage in a current IPA/IPO see our section on IPA/IPO Review and Variation)

It is very important that this particular aspect of the bankruptcy procedure is understood as any payment arrangement has to be reasonable and more importantly they have to be sustainable.

What do I do next? Use the CABmoney Bankruptcy Payment Order Calculator

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