Income payment agreements 17 July 2022 at 12:01AM in Bankruptcy & living with it 13 replies 1.1K views

ThunderHoof

Hi,

I am finding conflicting sources of information regarding how long it takes under bankruptcy for debts to be wiped off, a lot of resources say one year, but then stepchange and other places that are registered to give financial advice say that you can have to pay an income payment agreement for upto 3 years. Given that I would have maybe £250 left over after all my living expenses, I imagine this is something I would have to pay into? Considering that is less than half the length of the proposed DMP I would not really have a problem with that, but was just wondering if anyone could offer some clarity on what situations IPA's are usually imposed in? Thanks.

RAS

According to your SOA on another thread, you've less than £15K debt?

You could pay that back in 4 years and not have to answer yes to the bankruptcy question every time you want a mortgage, to rent, or a job in certain sectors.

sourcrates

To answer your specific question, an IPA will be imposed, if you have more than £20 per month disposable income, it will usually last for 3 years.

You are still normally discharged after the 12 months, but the IPA lasts another 2 years.

Bankruptcy is a tad extreme for a sub 15k debt, I would be tempted to look at other options first.

Pokerking

Yes I am currently paying £108 towards my IPA but this was £608 during bankruptcy as my tax was £0 so this went to Advantage who look after my IPA. The practitioner who sorted the IPA out was welcoming and was able to add the cost of newspapers, stationary for the little one. Unfortunately there was no getting away from paying an IPA for me. Other than having no job I am stuck paying for 3 years, still a massive improvement than struggling with debt.

I should note I was discharged after a year so technically out of bankruptcy.

ThunderHoof

RAS said:

According to your SOA on another thread, you've less than £15K debt?

You could pay that back in 4 years and not have to answer yes to the bankruptcy question every time you want a mortgage, to rent, or a job in certain sectors.

It depends on the outcome of the affordable lending complaint, if the Ombudsman don't agree with me, it's about £20k which is more than my net income.

I could hardly save up for a mortgage deposit on my income before the bankruptcy was removed from my credit file anyway so it's kind of a non issue. With the impending defaults on my credit file etc. bankruptcy would leave me with a clean credit file sooner, so I am really just looking at the overall costs of the two options now and which one would leave me debt free sooner.

sourcrates

ThunderHoof said:

RAS said:

According to your SOA on another thread, you've less than £15K debt?

You could pay that back in 4 years and not have to answer yes to the bankruptcy question every time you want a mortgage, to rent, or a job in certain sectors.

 With the impending defaults on my credit file etc. bankruptcy would leave me with a clean credit file sooner, so I am really just looking at the overall costs of the two options now and which one would leave me debt free sooner.

Err, no it would not.

No matter what debt solution you choose, it stays on file for 6 years.

In bankruptcy you may be discharged after one year, but it stays on your file for 6.

ThunderHoof

sourcrates said:

ThunderHoof said:

RAS said:

According to your SOA on another thread, you've less than £15K debt?

You could pay that back in 4 years and not have to answer yes to the bankruptcy question every time you want a mortgage, to rent, or a job in certain sectors.

 With the impending defaults on my credit file etc. bankruptcy would leave me with a clean credit file sooner, so I am really just looking at the overall costs of the two options now and which one would leave me debt free sooner.

Err, no it would not.

No matter what debt solution you choose, it stays on file for 6 years.

In bankruptcy you may be discharged after one year, but it stays on your file for 6.

I think you misunderstood what I meant. What I'm saying is that because I would not be able to save any money for the next 3 years while paying all my spare income to the bankruptcy, by the time it came to actually having a decent savings pot we would be around the 6 year mark anyway so the past bankruptcy would be wiped, thus irrelevent.

Whereas with a DMP, a creditor could still default your debt 3 years into the DMP which would mean you credit file would be tarnished for the next 9 years in that example.

sammyjammy

That is why its recommended people get a default on their debts before making payments in a DMP,  just to be clear you are never clear of bankruptcy, in some situations you are legally required to declare it forever.

sourcrates

ThunderHoof said:

sourcrates said:

ThunderHoof said:

RAS said:

According to your SOA on another thread, you've less than £15K debt?

You could pay that back in 4 years and not have to answer yes to the bankruptcy question every time you want a mortgage, to rent, or a job in certain sectors.

 With the impending defaults on my credit file etc. bankruptcy would leave me with a clean credit file sooner, so I am really just looking at the overall costs of the two options now and which one would leave me debt free sooner.

Err, no it would not.

No matter what debt solution you choose, it stays on file for 6 years.

In bankruptcy you may be discharged after one year, but it stays on your file for 6.

I think you misunderstood what I meant. What I'm saying is that because I would not be able to save any money for the next 3 years while paying all my spare income to the bankruptcy, by the time it came to actually having a decent savings pot we would be around the 6 year mark anyway so the past bankruptcy would be wiped, thus irrelevent.

Whereas with a DMP, a creditor could still default your debt 3 years into the DMP which would mean you credit file would be tarnished for the next 9 years in that example.

Understood, apologies for that.

The MSE approach to debt management, as mentioned above, differs from the debt charity advice.

We mostly take the view that you don`t start debt management, until at least the majority of your debts are defaulted, you can then use the complaints process to get any stragglers backdated, but the less work involved the better.

Its like anything you might want to take on, you pre-plan things, never just jump straight in, pre-planning your entry to debt management ensures you get as smooth a ride as possible, and the thing works for you, instead of against you.

A little knowledge and some common sense can go a long way in these situations, when you know the process, you can use it to your advantage. 

RAS

As explained, the whole point of stopping paying you creditors now, is that within a few months most will have defaulted you, so in 6.5 years you have a decent credit record.

Mean-time you use those early months to built up a good emergency fund to self-insure against life.

Those who don't default can't take legal action against you. So if you hold your nerve, they will do. If you don't want to use Stepchange, consider self management and only pay those who've defaulted.

Bankruptcy and IVAs have to declared on any form that asks the question, for life. That could be rental agreements, credit agreements, including media and mortgages, and jobs.

Edited: Just to add, after a few years many debts will have been sold on and you may get offered settlement deals. Some play hardball, others might offer 50% and if you offer close say yes. So you need not pay back the whole sum.

ThunderHoof

The biggest loan I have they are asking for basically £10k for a £3.5k loan, so it would cost them over £500 minimum just for a hearing at the court, so I don't think they will go down that road If I can offer them something reasonable. As for for the defaulted debts, they seem to act way more reasonably.