Bankruptcy - Income and Expenditure Case Study Number 1
Jerome is a bachelor. He rents a flat. He normally receives £1400 take home pay each month.
Following his bankruptcy Jerome no longer has to pay any sum to eight credit card companies to which he owed £40,000. His monthly costs of living (rent, food, gas, electricity, travel, clothing etc) come to £1200.
Is Jerome to be requested by the Official Receiver to pay £200 per month under an Income Payments Order or unde an Income Payment Agreement?
The answer is yes and no.
In the first year of the bankruptcy Jerome's take home pay is likely to increase from £1,400 for the period to the following 5 April owing to the fact that no tax will be payable in that period. (Click here to read the relevant paragraph of the layman's guide).
If, consequently, the take home pay for that first period rises to say £1,600 per month, then the Income Payments Order for the first period (to the following 5 April) would be approximately £400 per month.
For the remainder of the three year bankruptcy period Jerome's take home pay would return to being £1400 per month and his Income Payments Order would then reduce to £200 per month.
Never sign an Income Payments Order unless you have first taken professional advice.
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