Income payments in bankruptcy: IPAs and IPOs
Bankruptcy usually ends after a year, but if you have spare income you may be asked to pay towards your debts for up to three years.
Applies to: England & Wales
What to do now
- Prepare a full, honest budget with the budget calculator.
- Keep evidence of your essential costs — bills, travel, childcare.
- Tell the trustee straight away if your income or costs change.
How the trustee works it out
You give the trustee details of your income and spending, and those of your spouse or partner. The trustee decides what you need for reasonable household costs, such as rent or mortgage, bills, food, clothing, insurance, phone and vehicle costs. Money left over is spare income. Pension payments you are receiving usually count as income.
Income Payments Agreement
If the trustee thinks you can afford payments and you agree, you sign an IPA. It can last up to three years and is legally binding. The trustee, or an agent such as Advantis Credit, collects the payments.
Income Payments Order
If you do not agree, the trustee can apply to the court for an IPO. Under section 310 of the Insolvency Act 1986:
- the application must be made before you are discharged;
- the court cannot reduce your income below what is needed for the reasonable domestic needs of you and your family;
- the order can run past discharge but cannot end more than three years after it is made.
If your income is benefits
GOV.UK says the trustee will not normally ask for an IPA if your main or only income is state benefits.
If your income changes
Tell the trustee or collection agent immediately if your income or spending changes, if you have trouble paying, or if you receive a lump sum. Payments can go down as well as up. A lump sum can lead to a request for a one-off payment.
If you do not pay
The trustee can ask your employer to take payments from your wages, apply to suspend your discharge so you stay bankrupt for longer, or take other legal action.
After discharge
Discharge usually happens after 12 months, but an IPA or IPO keeps running until it ends. Your other bankruptcy restrictions lift at discharge unless a restrictions order or undertaking is made.
Weighing it up
For someone with steady spare income, three years of income payments means bankruptcy can cost more over time than the 12-month headline suggests. Compare the total with what an IVA or a DMP would ask, alongside the effects on your home, job and credit record.
This page explains how the solution works. It is not a recommendation, and it cannot tell you whether it suits you — a free, regulated debt adviser can look at your full situation.
You never have to pay for debt advice. MoneyHelper (government-backed), StepChange, National Debtline and Citizens Advice all give free, confidential advice with no obligation.
Common questions
How long do bankruptcy income payments last?
Up to three years. An Income Payments Agreement can last up to three years, and an Income Payments Order cannot end more than three years after it is made.
Do I still pay an IPA after discharge?
Yes. An IPA or IPO continues after discharge until it ends.
Will I have to pay if I'm on benefits?
The trustee will not normally ask for an Income Payments Agreement if your main or only income is state benefits.