This article explains the difference between income Payment Orders (IPOs) and Income Payment Agreements (IPAs) and how an IPA is calculated.
Difference between an IPO and an IPA
Both IPOs and IPAs are legally binding agreements that are made after you have met with the Official Receiver (OR) or trustee. At that meeting, you’ll be agreeing to a monthly budget that you can live on, and that you will pay a proportion of any surplus to the OR/trustee.
An IPA is legally binding and has the threat of court action and prison if the payments are not made. It lasts for a maximum of three years after the agreement was made after which time the agreement is terminated. You don’t have to go to court to enter into this type of agreement.
If you can’t agree on the amount to be paid with your trustee then you’ll need to let the courts decide and they will decide on the amount and the length of time the IPO will run for. It also carries the threat of prison if payments are not met.
How are IPA payments calculated?
The OR or Trustee will look at your income and expenses, then work out the amount left over each month which can be used to pay towards your debts and bankruptcy costs. If your expenses or costs are unusually high (compared to the average), then you will need to explain these.
If you have a partner that is working then their income will also be taken into account as they can contribute towards the agreed budget and therefore increase the surplus.
The key is to both is ensuring nothing is missed from your budget. Make sure you include:
- Mortgage or rent
- Bills – council tax, water, gas, electricity,
- TV License
- Car – tax, insurance, maintenance, fuel
- Other travel costs – bus, train, tube
- Food and other household items
- Clothes and shoes
- Home repairs and general maintenance
When the OR calculate your IPA payments, they might ignore costs which they deem unnecessary, such as the amount you spend on tobacco a month. This means you will no longer be able to pay for these items. Similarly, they might also overlook some income you get, such as disability living allowance. Therefore if your income is solely made of benefits or a state pension, the OR will normally not set an IPA.
What If I can’t pay the amount on my IPA?
In the first instance, you must contact the OR/Trustee who has overseen your bankruptcy as they should be able to assist you directly (such as adjust the amount you need to pay). If you continue to miss payments the OR/Trustee could take court action to get the missed payments from you. If you don’t pay an IPA or IPO the OR can take further actions, such as take payments straight from your wages.
How long is an IPA?
An IPA will last for a maximum of 3 years. It might in some circumstances last up to 4 years (if it starts 12 months after your bankruptcy before you are discharged).
What if my circumstances change?
Should your circumstances change, such as income or living costs the amount being paid under the agreement or order can also change. This change and be driven by you if you want the payments to be lower or your trustee if they want the payments to be higher. If you stop or reduce your payments without notifying the OR/Trustee there is a risk that you could be taken to court.