Bankruptcy changes to hurt those hurting most!

The Insolvency Service (UK) has made changes to how they deal with Income Payments Agreements and Income Payments Orders for those who are subject to Bankruptcy. The changes are universal affecting all those subject to bankruptcy proceedings from 1 December 2010.

Income Payment Agreements are legally binding agreements between the bankrupt and the trustee in bankruptcy. The bankrupt agrees to pay a monthly contribution from his/her surplus income for a defined period (maximum of 3 years). This is designed to pay some of the cost of administrating the bankruptcy and to provide a return to creditors. Those who refuse to enter an Income Payments Agreement can be made by court to enter into an Income Payments Order.

Previously Income Payment Agreements were not sought unless a bankrupt had a surplus income of above £100. The Trustee would then usually look to take between 50-70% of any surplus income above this figure, meaning only those with high levels of surplus incomes were subject to Income Payments Agreements.

As of 1 December 2010 the Insolvency Service has stated that any bankrupt with a surplus income of more than £20 can be asked to enter into an Income Payments Agreement. Those entering into such Agreements will now have to pay 100% of their surplus income above £20.

Those who petition for their own bankruptcy do so as they have insufficient funds to pay their debts. The Insolvency Service has already increased the bankruptcy fee from £360 to £450 as of April 2010 and now it seems they are cashing in on the increasing numbers of bankruptcies even further.

These changes will mean that those who believed they would pay nothing through bankruptcy may have a shock to their system.

It is imperative, now more than ever, for those considering bankruptcy to get advice and assistance from a reputable company before petitioning for their bankruptcy.

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