Ask a StepChange (formerly CCCS) counsellor a bankruptcy question

yorkshireman1982 · 12 July 2015 at 4:46PM

Hello,

I'm currently collating my information ahead of filing for insolvency. I've been examining the IPA rules and requirements and something has me extremely nervous.

I currently pay child maintenance to my ex-spouse for my two children. It's an informal agreement based on government guidelines (20% of net income) that we established when we first parted many years ago.

The rules suggest this will not be deemed a necessary expense under the IPA as my children are not living with me i.e. not dependant.

There is some ambiguity over how definite this is, could anyone clarify? Will my maintenance not be considered when calculating my IPA?

Thanks in advance for your help

StepChange_James · 13 July 2015 at 4:11PM

yorkshireman1982 wrote: »

Hello,

I'm currently collating my information ahead of filing for insolvency. I've been examining the IPA rules and requirements and something has me extremely nervous.

I currently pay child maintenance to my ex-spouse for my two children. It's an informal agreement based on government guidelines (20% of net income) that we established when we first parted many years ago.

The rules suggest this will not be deemed a necessary expense under the IPA as my children are not living with me i.e. not dependant.

There is some ambiguity over how definite this is, could anyone clarify? Will my maintenance not be considered when calculating my IPA?

Thanks in advance for your help

Hi Yorkshireman1982,

Thanks for posting and welcome to the forum.

It's hard to be give a straight answer as much depends on the circumstances and these things are often decided on a case by case basis. Having said that, as CSA agreements are taken into account in IPA calculations I'd hope an Official Receiver would see informal agreemetns which are in line with the guidelines as being allowable too.

The relevant section is in Part 7 of the involvency technical handbook: 31.7.120:

It has been the case however, that when assessing the bankrupt's ability to pay under an IPO, the court has previously held that such obligations are reasonable demands upon a bankrupt’s income and has taken full account of the obligations arising from a maintenance order or a Child Support Agency (CSA) assessment such that it would not make an order for an amount which would limit a bankrupt’s ability to meet those obligations.

If you would like more in depth advice about bankruptcy, or any other debt solution, you can contact us here: http://www.stepchange.org/Contactus.aspx and we can give you full debt advice.

Kind regards

James

yorkshireman1982 · 13 July 2015 at 5:32PM

Thanks James, appreciate your reply, it's the ambiguity of the wording that is frustrating.

I guess I will have to do some asking on the boards if anyone else has faced a similar concern as I need to be able to prepare for an outcome that means my maintenance cannot be paid.

Thanks again

curlyK · 15 July 2015 at 8:56PM

Hi Step Change,
I am about 42 months into my joint IVA with my husband. We both work full time but due to illness I really need to leave work. My parents have advised that they would help me financially (they want me to leave work for my health but don't know I have IVA) but if I offer a F & F will the IVA Supervisor have to contact my parents? I really wouldn't want them to know the mess I've been in especially as we have managed the IVA really well and met every payment and working with the IVA company all the time. We are going to come out of this much more money savvy then we were previously!!
Awaiting you response - thanks.

StepChange_James · 17 July 2015 at 11:42AM

curlyK wrote: »

Hi Step Change,
I am about 42 months into my joint IVA with my husband. We both work full time but due to illness I really need to leave work. My parents have advised that they would help me financially (they want me to leave work for my health but don't know I have IVA) but if I offer a F & F will the IVA Supervisor have to contact my parents? I really wouldn't want them to know the mess I've been in especially as we have managed the IVA really well and met every payment and working with the IVA company all the time. We are going to come out of this much more money savvy then we were previously!!
Awaiting you response - thanks.

Hi CurlyK,

Thanks for posting. It's one to ask your IVA supervisor diretly. I suspect they'll want to know about where the money is coming from before looking to vary your IVA. What kind of information or proof they'll want is up to them really, so I'd recommend having a chat about it.

It's great to hear that being in your IVA has helped you with managing your money. I've heard people say similar things before too. The good thing is that most of those people keep those new found money management skills after getting out of debt and are able to get more out of their money once their debts are out of the way.

Good luck with everything.

James

Faunus · 18 July 2015 at 6:28PM

Hi, thanks for the opportunity to ask this question. My boyfriend has just declared himself bankrupt and the OR has asked for my wage and my expenses which surprised me as I am not the banckrupt.

We have lived together in rented accommodation for approx 18 months and the debts were accumulated before this. We have included his wage and his expenses (full cost in the case of joint expenses such as gas, electric, rent, council tax) in the application and included my contribution towards these costs in the box marked partners contribution. The OR has asked us to complete an IPOQ (basically the income and expenditure form all over again) but this time including my full wage in the contribution box and my expenditure as well.

He earns approx £1800pm and I earn £1200pm full time for both so we are not on £100K wages or anything suspicious.

Can they ask for my income and expenses rather than just his and joint expenses? If I put my full wage in the contributions box then there will be a massive surplus of non essential expenditure but I will be penalised by his bankruptcy. Our CAB advisor has said we have to provide whatever information is requested.

My contribution is broken down as follows :
rent, council tax 1/3rd contribution - justification - we need to live in this area due to his children and the making the court contact order workable. We need two extra bedrooms due to his 3 children. He earns 2/3rds more than me.
Gas, electric, tv license, water, basic sky tv, broadband, contents insurance, all 1/2 each
Housekeeping 2/5ths (him, him, me,me,children)

The OR was generally happy with the expenses we listed refusing only 4 items adding up to £100pm and she actually increased one item which was too low!

I am really worried about putting my full income in the contributions box and feel this is misleading.

I look forward to your reply, Many thanks.

fermi · 18 July 2015 at 6:37PM

You are not obliged to disclose your income, but the OR wants to know it so they know whether the shared expenses have been divided fairly, not to actually claim your income. i.e. if he earns 60% of the household income then he would be allowed to pay 60% of the shared household costs.

If you refuse to tell them your income then the standard practice of the OR is to assume a 50:50 split.

From OR's technical guidance documents

Note it it the bankruptcy share of any surplus, not the total that can be claimed in an IPA. While knowing your income allows this to be calculated, it's only surplus from their part that can be claimed.

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.

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.

Faunus · 18 July 2015 at 8:18PM

Thank you for your quick and informative reply. I have already provided my income verbally over the phone during his interview, then she started asking about my car related expenses and mentioned my other expenses which must be put on the form. I assume we are OK to decline this information and instead provide a breakdown of my contribution as I have done on this forum.

Thanks for your help

fermi · 18 July 2015 at 8:39PM

If they are your personal expenses and not shared ones then you are not obliged to tell the OR anything you don't wish to, and they are not actually relevant to the calculation the OR must do to work out the IPA payable from your OH's surplus.

So up to you.

If they make a fuss or trouble about it I would suggest that you careful read

https://www.insolvencydirect.bis.gov.uk/technicalmanual/Ch25-36/Chapter31/part7/Introduction.htm

and the linked parts 1-5 there, which are the OR's own guidance on IPAs, so if they try to make you effectively pay out of your surplus, then you can refute and oppose it.

Also remember that any proposed IPA is an agreement. Your OH DOES NOT have to sign it if they think it is wrong or unreasonable.

The only way the OR can force an IPA is to go to court to make it an IPO instead, which you could oppose and show why it was wrong and unfair. IPOs are in the first place very rare, and if it was unfair then the OR would be daft to try for one, and honestly is very very unlikely to try.

Do not get bounced into agreeing payments which are wrong or unfair. Some ORs will give you the impression you have to, but you can always fight your case.

Faunus · 19 July 2015 at 8:19AM

Thank you so much for that. We felt very pressured to supply this information even though it seemed irrelevant and wrong. It's good to know that it's an agreement (negotiable) rather than a cast iron direction.

Your help is very much appreciated, thank you.

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