Income payment arrangement dodge - career change/break

Magpie170808 · 6 November 2017 at 2:57PM

Hi all,

I declared myself bankrupt in late July and in order to avoid being hit with an income payment arrangement I took a job that pays about half the one I did shortly before I went bust. I would not have done this but for the rule change in 2010 which basically, stripped all incentive for the bankrupt to earn any money over and above "reasonable needs" as agreed with the official receiver (OR). It used to be you kept 50%, or 30% if you're a high earner, during the term of the income payment arrangement, of this "excess income". Now the OR would take the lot, for three years!
So I basically jacked in my £30k job and replaced it with a £15k job. At least this way I only have to manage on a "reasonable needs" income for one year, rather than three. I've just passed the 100 day mark without any problems, other than the compromise to my living standards.
I'm just wondering if anyone else out there has done anything similar, has the government shot creditors in the foot with this rule change or am I one of only a very few cheeky/brave/selfish? enough to do this? I am confident I will be able to return to my old job after discharge as I have skills and qualifications that are in demand.

StopIt · 6 November 2017 at 3:13PM

The bit at the end is why it was likely thought that it was worth doing the change.

You may well be able to get your old earning power back after the BR period. The economy might crater, and you may find yourself unable to all the same.

You've took a calculated risk, which is totally fine. As you said, it has also had costs to your living standards. Some people would rather pay their excess income to an IPA for 3 years to wipe their debt as of course, they were paying this and then some on managing unsustainable debt, hence the BR.

You certainly wont be alone in your decision. For those who work Overtime or the self employed, it is certainly an incentive to work to your needs, and not work for the OR. It isn't for everyone, however.

Darrenm325 · 6 November 2017 at 3:38PM

I’m in a job where overtime is compolsery some months I will do 10 hours of over time and other months up to 60-80 hours overtime where I can earn a extra £800-£1000 in one month how would they work out a suitable ipa amount for overtime that changes each month

Magpie170808 · 6 November 2017 at 4:05PM

Darren,

Overtime is a funny one. I would say if it is contractural then the OR will take it into account. I have done some extra hours (non compulsory) without any problems, which has been useful to create a financial buffer and pay for the odd treat not really allowed for under the post 2010 regime, a bit of a loophole, I guess. If you're thinking of going bankrupt I'd definitely speak to step change first. I actually defied their advice but the info they gave me was very useful.

Darrenm325 · 6 November 2017 at 4:17PM

I’m all ready BR 3 months in now

StopIt · 6 November 2017 at 4:30PM

Darrenm325 wrote: »

I’m in a job where overtime is compolsery some months I will do 10 hours of over time and other months up to 60-80 hours overtime where I can earn a extra £800-£1000 in one month how would they work out a suitable ipa amount for overtime that changes each month

Remember they don't have to in order to claim that money.

An IPA is a formal mechanism but not the only one.

If you earn £1,000 more than your SOA states in one month, you'll have to report this to the OR, who will take the excess payment, as that will belong to the OR. No IPA needed for that.

Butts · 6 November 2017 at 5:42PM

Magpie170808 wrote: »

Hi all,

I declared myself bankrupt in late July and in order to avoid being hit with an income payment arrangement I took a job that pays about half the one I did shortly before I went bust. I would not have done this but for the rule change in 2010 which basically, stripped all incentive for the bankrupt to earn any money over and above "reasonable needs" as agreed with the official receiver (OR). It used to be you kept 50%, or 30% if you're a high earner, during the term of the income payment arrangement, of this "excess income". Now the OR would take the lot, for three years!
So I basically jacked in my £30k job and replaced it with a £15k job. At least this way I only have to manage on a "reasonable needs" income for one year, rather than three. I've just passed the 100 day mark without any problems, other than the compromise to my living standards.
I'm just wondering if anyone else out there has done anything similar, has the government shot creditors in the foot with this rule change or am I one of only a very few cheeky/brave/selfish? enough to do this? I am confident I will be able to return to my old job after discharge as I have skills and qualifications that are in demand.

I moved down from Scotland and halved my earnings as well. I also rented a place that falls within the LHA just in case I had to go on the "old king cole" and was assured all my rent would be covered by Housing Benefit.

Like you I have had a "designer bankruptcy" aimed at avoiding an IPA whilst still enjoying a comfortable if basic lifestyle. I was amazed how lax the OR is and the interview was far less invasive than I was expecting.

My only regret is that I did not accumulate a few grand in cash prior to my bankruptcy. I was expecting every line of my bank account to be scrutinised but it didn't happen.

If an IPA resulted in you only paying back 50% of the excess earnings I to would have maintained my earnings at the previous level.

As they take the lot what's the point.:D

xfoxuk · 6 November 2017 at 6:26PM

Everyone is different, but If bankruptcy was caused due to Mental health, and you have medical evidence, then probably better off on JSA/ESA. The OR will look into people changing jobs before hand, selling off assets, boasting about it on forums etc

BorisThomson · 6 November 2017 at 7:19PM

I can't believe MSE allows threads like this, which give such a bad name to bankrupts. All those genuine BRs working hard to get their lives back on track get a hard time because of people like you.

[Deleted User] · 6 November 2017 at 9:07PM

I don't think there's anything wrong with it - rules are there to be tested/broken/flexed....

If they didn't want you changing jobs, they'd base IPA on average earnings in last 12 months.... which would push some people further into difficulty and so probably onto JSA etc.

Likewise some people, had bankruptcy not existed, would HAVE to repay their debts via DMPs, arrangements to pay etc etc. So you could argue that some (many?) people that have gone bankrupt are bending the rules by doing that rather than agreeing payment plans with lenders.

Personally I think I owed approx £60k (no idea if thats high/low). Mistakes are mistakes, I reached that number and had to find a way to pay it back.

Given my likely career progression (from ~18 months after bankruptcy onwards), I'd potentially have been able to enter into agreements with lenders, and pay the debt off... eventually.

I decided that it was not the wisest idea because I'd be paying off debt for (say) 10 years, have no sayings at the end of it, have a trashed credit record for say 16 years (10 years to close accounts, then 6 years of the adverse) and need to save up afterwards for a mortgage etc.

By going bankrupt, in 4 years from BR I'm eligible for a mortgage (subject to managing to save). Technically, you're eligible from 12 months (discharge day), if you can "save" enough deposit.

I'd call that taking advantage of the system, in a similar way as posters on here have avoided IPAs. Again - if the rules let you do it, then do it. If companies were that concerned about losing money to bankrupts, many more would say no lending EVER (and search the Gazette with each credit application) or no mortgages until five, six, ten, twenty.... years discharged.

That would then have changed my decision on how to deal with my problem debts.

Everyone should lookout for themselves, without taking the mick and breaking any laws. Failure to do so may mean they're back in that situation again!

The 100% surplus rule is stupid IMO - if you're allowed a vehicle for work, and that suddenly breaks down with a £900 repair bill, how do you pay that if you've been given scraps to live on for 3 years post bankruptcy?

Also need to remember that if the OR thinks you're taking the mick, they'll go through everything line by line.

I remember reading about 1 person who put their expenses to be the same as the absolute limits from the OR Technical Guidance (or 1p under, something silly like that).

The OR knew they were taking the mick, and gave them a very hard time, wanted receipts for everything, proof of bill payments etc.

The OR is human, and going bankruptcy is not something the vast majority of people will do unless they really need to. I didn't think it would be that big a deal psychologically - but years on still seeing you struggle to get cheap car insurance (some companies decline based on credit file soft search = BR record), you can't take advantage of bank switching offers, you no longer have access to cheap finance.... it does add up.

Whilst there is no doubt many people are in a significantly better position after bankruptcy than before (IPA or no IPA), due to debts being written off - can you put a price on the following 6/7 years of being declined or referred for "normal" things?

KeepOnKnitting · 6 November 2017 at 11:03PM

I did indeed do something similar to this. I was self-employed at the time of bankruptcy, so I made sure that I didn't do too many hours in order to attract an IPA. After years of 50+ hour weeks, it was great to only have to work 35-40 hours a week to survive. Then I became a student nurse, and the OR was even less interested in my income. I think I am putting infinitely more into society this way than I would have been working on minimum wage for 15 years to pay back £50k I owed from the property crash.