Income Payment Agreements and Orders

Solicitors for Income Payment Agreements and Income Payment Orders

Income received by a bankrupt during their bankruptcy does not automatically get paid into their bankruptcy estate.

After being made bankrupt, the Official Receiver / Trustee in Bankruptcy will carry out an investigation into the bankrupt’s financial affairs. A bankrupt may retain their income to cover their reasonable domestic needs. An Income Payment Agreement (IPA) or Income Payment Order (IPO) however allows the trustee to claim any income, earnings or payment received by the bankrupt beyond the amount reasonably needed. This can only be done while the debtor is an undischarged bankrupt.

What is an Income Payment Agreement?

If a bankrupt’s income is high enough, the trustee will request that contributions be made to the estate under an IPA which is:

• Legally binding
• Last for up to 3 years
• Minimum of £20.00 disposable income per month
• No Court involvement
• Flexible and can be changed if circumstances change
• Can be started at any time within the first 12 months following bankruptcy.

The money recovered under an IPA will be used to cover the costs of administering the bankruptcy and to make payments to the creditors.

What is an Income Payment Order (IPO)?

If you refuse or disagree with the terms set out in the IPA, the trustee has the option to apply to Court for an IPO. The Court will then determine what it deems as

If you do not make payments towards your IPA or IPO, the trustee can take further action. For example, they can apply for an attachment of earnings to take payments directly from your wages.

Farleys act on behalf of both bankrupts and trustees and we can provide guidance and assistance in negotiating the terms of an IPO or IPA, which in some cases can be complex and difficult.