IPA / (IPO?) after bankruptcy - Now including SOA

jamiesmack

Once my bankruptcy has been accepted, we wont be in a surplus for a while as my self employed business will close. Once I have a new job I expect we may have a small surplus, and therefore an IPA (or IPO, Im not sure which it is).

Im trying to understand how they work, My wife (who is not going bankrupt) earns quite a lot more than i will, is this better for an ipa? am I right in thinking, that if our household income is weighted 60/40 in her favour, then i will pay 40% of any surplus into an ipa?

For example:

My wife's monthly income is £1640
My expected monthly income will be: £1200
Wife income 57% of household
Possible surplus £200
£86 into ipa
£114 wife's allowed surplus



Also my wifes salary is due to increase to £1726 in feb, so that will update to
£2926 total income,
wife income 58.9% of household,
surplus of £286,
£117 into ipa,
£169 wifes allowed surplus.

Does this seem right?

TheGardener

IPA - is an income payment agreement - you agree to pay this based on the calculations.
IPO - is an Income payment order - this is where despite negotiations, you and the OR do not agree on the surplus and the OR applies for an Order that obliges you to pay even if you don't agree. It is to be avoided if possible but if you genuinely feel the OR has their sums wrong then you need to make the case.

After sharing the household living costs proportionally, 100% of any surplus over £20 in your income will go to the OR. If your wife is happy to also pay into the IPA then the OR will determine the %...

There are some who would suggest that if the partner of a BR earns more than the BR, it may be worthwhile them not disclosing their income - that's entirely up to them, they cannot be forced to do so. In this instance the OR would apportion 50/50 on the household expenses. It might be worth doing the maths on this...? Your wife is not required to inform the OR of an increase in pay. If you are going to disclose her income then tell he OR what it is now.
Have you sought advice on this?
If you post an SOA on here we can help with ensuring you cover all your costs. There is a template here with a format button at the end to post on this forum.

One other point - please ensure your wife has no joint banking arrangements with you - even things like utility bills or your BR will significantly affect her credit history.

See this thread for interest https://forums.moneysavingexpert.com/discussion/5915158/household-surplus-income-question

jamiesmack

Statement of Affairs and Personal Balance Sheet

Monthly Income Details
Monthly income after tax................ 1641
Partners monthly income after tax....... 590
Benefits................................ 89
Other income............................ 0
Total monthly income.................... 2320

Monthly Expense Details
Mortgage................................ 0
Secured/HP loan repayments.............. 0
Rent.................................... 895
Management charge (leasehold property).. 0
Council tax............................. 127
Electricity............................. 30
Gas..................................... 30
Oil..................................... 0
Water rates............................. 52
Telephone (land line)................... 30
Mobile phone............................ 70
TV Licence.............................. 13
Satellite/Cable TV...................... 42
Internet Services....................... 20
Groceries etc. ......................... 430
Clothing................................ 80
Petrol/diesel........................... 140
Road tax................................ 24
Car Insurance........................... 70
Car maintenance (including MOT)......... 30
Car parking............................. 20
Other travel............................ 30
Childcare/nursery....................... 0
Other child related expenses............ 20
Medical (prescriptions, dentist etc).... 30
Pet insurance/vet bills................. 60
Buildings insurance..................... 0
Contents insurance...................... 0
Life assurance ......................... 14
Other insurance......................... 0
Presents (birthday, christmas etc)...... 20
Haircuts................................ 30
Entertainment........................... 50
Holiday................................. 0
Emergency fund.......................... 30
Pocket Money............................ 10
School Meals............................ 60
Total monthly expenses.................. 2457


Assets
Cash.................................... 0
House value (Gross)..................... 0
Shares and bonds........................ 0
Car(s).................................. 0
Other assets............................ 0
Total Assets............................ 0

No Secured nor Hire Purchase Debts

Unsecured Debts
Description....................Debt......Monthly...APR
Total unsecured debts..........0.........0.........-


Monthly Budget Summary
Total monthly income.................... 2,320
Expenses (including HP & secured debts). 2,457
Available for debt repayments........... -137
Monthly UNsecured debt repayments....... 0
Amount short for making debt repayments. -137

Personal Balance Sheet Summary
Total assets (things you own)........... 0
Total HP & Secured debt................. -0
Total Unsecured debt.................... -0
Net Assets.............................. 0

Created using the SOA calculator at https://www.stoozing.com.
Reproduced on Moneysavingexpert with permission, using other browser.

jamiesmack

Those are the figures I worked out with stepchange. can you have a look if I have under / overvalued anything for a 2 adult, one child household? specifically for bankruptcy. Thanks

debt_doctor

I did post earlier (now deleted)as you said in your SOA "Partners income" when it was infact partners contribution. You do make this clear in your first post, but I went straight to your SOA.

Instead, I now post this, as I have recently for another poster....

A couple of years ago the Insolvency Service adopted the Standard Financial Statement (SFS) to calculate surplus monies for an IPA. In many ways this was better for the bankrupt as the expenditure allowances were greater than the formerly used Household Expenditure Survey.

But rightly or wrongly, the IS are asking for full income of bankrupt and non bankrupt partner - putting the full family expense allowances (if claimed) including children etc in to the SFS - then if it shows a surplus, they pro rata the surplus to get the bankrupts expected IPA payment.

In addition to this, the Technical manual (public version) has not been updated for more than 2 years.

I completely agree with the earlier quote about a non bankrupt partner not wanting to disclose their income - and have used that argument a couple of times over the years.

It is also a very valid point that a non bankrupt has to be able to pay their own contractual payments to any commitments they may have (which would be in the SFS) - the issue comes from pure surplus income - If the non bankrupt has a large genuinely surplus income it will influence the couples total surplus income and therefore the pro rata calculation on the surplus will make the bankrupts IPA larger.

Is this approach right? It's certainly different. Ultimately a court can decide.

jamiesmack

debt_doctor wrote: »

I did post earlier (now deleted)as you said in your SOA "Partners income" when it was infact partners contribution. You do make this clear in your first post, but I went straight to your SOA.

Instead, I now post this, as I have recently for another poster....

A couple of years ago the Insolvency Service adopted the Standard Financial Statement (SFS) to calculate surplus monies for an IPA. In many ways this was better for the bankrupt as the expenditure allowances were greater than the formerly used Household Expenditure Survey.

But rightly or wrongly, the IS are asking for full income of bankrupt and non bankrupt partner - putting the full family expense allowances (if claimed) including children etc in to the SFS - then if it shows a surplus, they pro rata the surplus to get the bankrupts expected IPA payment.

In addition to this, the Technical manual (public version) has not been updated for more than 2 years.

I completely agree with the earlier quote about a non bankrupt partner not wanting to disclose their income - and have used that argument a couple of times over the years.

It is also a very valid point that a non bankrupt has to be able to pay their own contractual payments to any commitments they may have (which would be in the SFS) - the issue comes from pure surplus income - If the non bankrupt has a large genuinely surplus income it will influence the couples total surplus income and therefore the pro rata calculation on the surplus will make the bankrupts IPA larger.

Is this approach right? It's certainly different. Ultimately a court can decide.

Thanks for the reply. I’m getting so confused here! Stepchange advisors have said I have no choice but to disclose my wife’s income. Is this the case? As many in here recommend that I don’t disclose.

ToxtethO'Grady

YOU have to co-operate with the OR but your wife doesn't have to.


The debt charities will only say what 'may' happen and until you have that discussion with the OR you won't know. You might get an examiner who says 'fine' and leaves it at that and go 50/50 or one who wants to push.


As Debt Doctor has said its up to your wife if she wants to disclose her income however it 'may' cause issues with any IPA and if they want they can force an IPO on you.


From your SOA you're in a minus so I don't think you'll get an IPA though

broaps

No-one is obliged to tell their partner what their income is so I 'm pretty sure you could tell the OR that you don't know the full details and that you just share the household expenses. However, if you have a joint account and your partners total salary has regularly been paid into it you may have some questions to answer if the OR has a look at your bank statements.

TheGardener

A recent poster (the partner of the BR) was dismayed to discover she didn't need to have disclosed her income - however, Stepchange led her to believe she had to. It was too late for her to change things. So far as the law is concerned - no, I don't believe your partner is under any legal obligation to disclose their income.

As suggested previously - do some sums on how much family surplus (based on the 2 scenarios - 50/50 or 40/60) and work out which is better for you as a family before you make the decision to disclose your partners income.

ToxtethO'Grady

31.7.71 Income received from spouse/civil partner/partner
It is reasonable to expect that within the household of the bankrupt and his/her family, the income received by a working spouse/civil partner/partner (all referred to as "partner" for the remainder of this section) or a partner who receives income from other independent means, will be used to contribute to the household expenditure in some way, for example by purchasing food, clothing for him/herself and any children, etc. The bankrupt may genuinely not know his/her partner’s income and/or the partner may not be willing to disclose it to the official receiver as they are not personally subject to the proceedings. Legal advice has been received that it is not a proper use of section 366 URL="https://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part7/part3/part_3notes.htm#6"]note 6[/URL to have a partner privately examined for the purpose of obtaining details of his/her income to establish whether an IPA/IPO may be obtained.


Section 366


Notes: [s366]
If there are unreasonable delays in the provision of information the official receiver may apply to the court for the private examination of the party concerned. A letter should be sent first drawing the person’s attention to the provisions of section 366 and the procedures at a private examination, including the possibility of the court making an order for the respondent to pay the costs of the examination. Often, the prospect of a private examination will be enough to encourage the party concerned to provide the information




31.7.72 Ascertaining partner’s income where bankrupt does not co-operate
Where resistance to the disclosure of the partner's income is encountered, in the absence of any information to the contrary, it is appropriate for the official receiver to assume that the working partner pays for 50% of all household expenditure. This will enable an income payments calculation to be completed to ascertain whether there is any surplus, and the bankrupt’s share of that surplus, against which an IPA/IPO can be sought. It is likely that an assumption of this nature will provoke a response from the bankrupt and/or their partner and if the required information concerning the exact amount of the partner’s income is then received, the official receiver may re-calculate the income and expenditure of the bankrupt taking in to account this new information.




31.7.74 Income from adult children and other adult members of household
In the same way as it is reasonable to expect that a working partner’s income will be included in covering household expenditure (see Section (i) of this part), it is also reasonable to expect other adults living in the household who have an income, such as adult children or members of the extended family who live all or some of the time with the bankrupt (this could include students), to make some contribution towards the outgoings of the household. Any contribution received from them should be included in income assessed against household expenditure within the IPA/IPO calculation, but it must be noted that an IPA/IPO claim can only be made against the surplus arising from the bankrupt's income.