After declaring bankruptcy, the Official Receiver will assess the bankrupt’s income and necessary living expenses. If the income is roughly similar to the expenses, the Official Receiver will not be able to introduce a repayment plan. If the income exceeds the expenses, the Official Receiver may propose that the bankrupt enters into an agreement called an Income Payment Agreement (IPA). The agreement is made for 3 years, regardless of the restriction period, which typically lasts for 12 months. The agreement can be suspended or cancelled if the bankrupt’s financial situation changes, for example, if they lose their source of income or permanently leave the UK. However, leaving the UK does not affect the consequences of the declared bankruptcy; the court’s bankruptcy order remains valid and enforceable.

It may happen that on the day of bankruptcy declaration, the Official Receiver does not have grounds to introduce an IPA. However, it should be remembered that the restriction period lasts for 1 year, during which the Official Receiver can monitor the bankrupt’s finances at any time. There are cases where the Official Receiver assesses income and expenses a few days before the end of the restriction period. In the meantime, the bankrupt may have started earning more, which becomes the basis for introducing an IPA. We always advise our clients to try to earn only enough to cover normal living expenses for the 12 months following the declaration of bankruptcy.

A positive aspect is that the Official Receiver takes into account almost all necessary expenses for normal living. These include rent, utilities, food, clothing, footwear, as well as expenses for postage, newspapers, and dry cleaning.