IPA if income fluctuates over the year? (self employed)

thinkpositive1

The last "hurdle" before I go BR (having gone through weeks of "do I? / don't I?" and getting plenty of advice) is my worry of being lumbered with an IPA.

I had a DMP for 2 years then 3 years on IVA (which I have not been able to pay and is about to "fail" as unaffordable).

I have done my Inc and Exp SOA for the bankruptcy forms and all the advice (CAB, Business Debtline etc.) has been not to worry much about getting an IPA as my income has dropped so much in the past 2-3 years that my IVA has become unaffordable and it is almost certain no IPA would result from bankruptcy.

I know I won't know the answer to this question until I have my OR meeting and possibly they may wait for sometime before making a decision on whether an IPA will be liable but I would like to know what likelihood is that the OR would leave me waiting til just before discharge before hitting my with an IPA.

Aside from having no affordable option left open to me now, one of the "advantages" of BR compared to my IVA is that I want to have a clear way forward and know where I stand financially and fret about 3 years worth of payments under an IPA when I only have 2 of an IVA to go (but I cannot currently afford them).

Because my income fluctuates a lot month to month (I could have no business income for 2 months then a decent payment and then nothing for a month etc.) that the OR may hang back on an IPA decision until they see how I have done for the forthcoming year and then if they see business has picked up a lot in the last few months of my BR, they may judge my income is looking more rosey and then say "looks like you've got x hundred quid a month spare now, we want that for the next 3 years !!"

I am told that for self employed people, they will look at income averaged over a year (and my last 2 years have been almost the same for business income, which is the lowest 2 years in 13 years of self employment) but this hides the fluctuations and I worry that if business picks up (which I should see as being a great thing) I then get lumbered with a 3 year IPA commitment that could itself fail if business takes another dip.

I just want to know where I stand as soon as possible after the OR interview but am not sure it will pan out like that.

What I would want to happen is the OR, after my interview and assessment is done, will quickly conclude "you have no surplus of £20 or more a month therefore there will be no IPA" and that is that, end of story. If business does pick up in a few months time, income increases then that's great for me....or am I kidding myself it will be like that and more likely, knowing I could pick up a decent contract here and there the OR may wait to assess the income over the next 10-11 months, assess it then and maybe determine I am liable for IPA payments for 36 months.

Anyone self employed able to advise?

thinkpositive1

Anyone been in a similar position?

alastairq

Hi...in many respects you have answered your own questions.

Yes, it is likely an OR will average-out your income over a year.

But, that in itself is negotiable [arguable?] between the BR and the OR.

The OR will not take the view of whether one's income looks like it might improve in the future. The OR looks at what you have got, not might get.

Whilst Undischarged, an improvement in income...which might lead to an IPA being agreed upon, is a problem for everyone. Does one seek betterment, or not?


But, sadly, most folk only consider the 'income' part of the argument...and fail to see the 'expenditure' side.

If one's income does suddenly improve, even if temporarily, one has to view that as an overall, over the year. That's what the OR will be doing.

IF.....that amounts to an overall surplus [according to the IS rules] then that surplus will e claimed, but is subject to agreement.....and is not imposed.

What needs to be remembered is....if income takes a rise..then so does expenditure.


What you have also forgotten is, how an IPA actually works.

[compared to actual debt repayments, or IVA repayments]

As when Undischarged whereby the BR individual is required to inform the OR of any changes in financial circumstances..........so is the case if under an IPA.

The IPA lasts, for 3 years, from date of agreement.......but can, and may, fluctuate up, down or go to zero altogether, dependant on the amount of income.

Thus,an IPA is not a fixed amount.

Variation on the amount of an IPA is agreed between the OR and the BR.

Indeed, if a sudden massive expense is faced, agreement can be sought with the OR to suspend any payments for a while.

Thus, an IPA is entirely flexible [since it is an agreement, not an imposition.], so..in itself is a vastly more preferable proposition that an IVA [which, to be varied, requires agreement from creditors, itself an awkward process]

Once the three years is up.....the IPA ceases...regardless of whether one has actually paid owt, or nowt, into it.

The downside is that, if, prior to Automatic Discharge, an IPA has been agreed, then one is tied to the OR for that 3 year period, with regards to, levels of income.

Surely a better place to be, eh?

If BR is your 'weapon-of-choice' in your battle to resolve debt....then it would be wise to seek assistance [from on here, usually, Debt Doctor is ace in this]....to produce evidential argument in your favour, over the amount of expenditure within your SOA. Thus, being able to argue if the OR tries to emplace an IPA.

thinkpositive1

Thanks alastairq, very helpful insight and I think the flexibility issue on an IPA is one I wasn't as aware of as I should be.

I think you have settled my concerns somewhat.

Bottom line is BR is the only option I now have (failing IVA, HMRC tax arrears and NRAM shortfall) and I need to face up to discussions with the OR.

Do you think Debt Doctor would be open to advising?

longtermplanner

If your only real option is to go bankrupt, then just get on with it! There isn't much point worrying about whether there will be an IPA if you have no choice. Just do it, then if you disagree with the imposed IPA, come back here and we'll look at whether it can be challenged. Working through different alternatives now might feel like a good idea, but actually it's just stressful and not helpful as many of the things you will be worrying about are unlikely to happen.

Edit - sorry that wasn't meant to sound irritated by your sensible questions. It is just very practical advice & well meant!

alastairq

failing IVA, HMRC tax arrears and NRAM shortfall

Are HMRC chasing you?

Is it a significant amount?

I ask, because, are they likely to petition for your BR for you...? [thus saving you the £700-odd fees?]

woodformoretrees

I was told that if my income looked like it was going to start averaging out over the agreed expenditure limit then I should get in touch with the OR and they would look at an IPA. He told me to give it six months before making a judgement call on that one.
I think I had a very nice OR.
I took the year of bankruptcy as an opportunity to not overdo the working hours and to replace my office equipment that had died and gone unreplaced over the past two years.

thinkpositive1

alastairq wrote: »

Are HMRC chasing you?

Is it a significant amount?

I ask, because, are they likely to petition for your BR for you...? [thus saving you the £700-odd fees?]

Depends how you define chasing. I owe tax for 2011-12 (£1.8k ish) which should have been all paid by last Jan. Have spoken to them and the party line (as was in mid March) was "ideally we want all that paid before new tax year" (yesterday) but they would possible look at a time to pay arrangement (over 12 months max I think). That is still not affordable for me and with 2012-13 tax unpaid too, it's stacking up.

Not sure I can wait or would want to wait for HMRC to petition for me BR as I have no idea how long that could take and frankly just want to get it done now, know where I stand and make a fresh start.

alastairq

fair enough....

thinkpositive1

Alistair - I maybe coming around to your idea of allowing someone to bankrupt me (like HMRC) as I went to court today all prepared and was told that as I am in an IVA (which is failing) I cannot declare myself bankrupt yet. I need to wait for the IVA to be terminated!!

I am trying to get in control but with this situation would I be better just waiting for a creditor to bankrupt me and, as you said, save myself the £700 fees?

That's not meant to sound flippant but in all the advice I sought (my IP, CAB, Business Debtline and a solicitor specialising in bankruptcies) NOT ONE of them warned me I could not petition my own bankruptcy until my IVA had been terminated. Today was a waste of time.

Is there pros and cons to someone being made bankrupt rather than petitioning their own bankruptcy?

I assume all the paperwork (which I was up til 2am last night completing and printing off) remains the same?

woodformoretrees

thinkpositive1 wrote: »

Alistair - I maybe coming around to your idea of allowing someone to bankrupt me (like HMRC) as I went to court today all prepared and was told that as I am in an IVA (which is failing) I cannot declare myself bankrupt yet. I need to wait for the IVA to be terminated!!

I am trying to get in control but with this situation would I be better just waiting for a creditor to bankrupt me and, as you said, save myself the £700 fees?

That's not meant to sound flippant but in all the advice I sought (my IP, CAB, Business Debtline and a solicitor specialising in bankruptcies) NOT ONE of them warned me I could not petition my own bankruptcy until my IVA had been terminated. Today was a waste of time.

Is there pros and cons to someone being made bankrupt rather than petitioning their own bankruptcy?

I assume all the paperwork (which I was up til 2am last night completing and printing off) remains the same?

Do you have a property or assets? I'm not sure that HMRC will make you bankrupt very quickly if you don't.

I have a substantial asset in my house and it really took them a while to get there. Looking back on the situation I should have given in and petitioned my own bankruptcy about 2 years before it went ahead, just to get it over and done with, especially with the possibility of a further 3 years of IPA to pay out.

Obviously you need to do what's right for you.