Changes To Bankruptcy Policyposted on 6 December 2010 | posted in General Category | ( 0 ) CommentsFrom the 1st of December 2010 the policy surrounding the amount a bankrupt person is required to pay towards their debts was changed. However debt advisors at Integrity have advised that although this was to be expected from the government, it will not affect the way that they advise and help their clients. The change is only a matter of formality and Integrity will still be able to provide their excellent and recommended service to people looking to enter personal bankruptcy. Lets have a look at how the change may affect people declaring bankruptcy: If you declare yourself bankrupt, the official receiver will review your income and living expenditure budgets. Any money left over once all of your essential and reasonable living expenses are paid is called disposable income. Before the 1st of December 2010, if your disposable income was anything up to £100, you would have been allowed to keep this money. If your disposable income was over £100 you would have been required to pay up to 70% of this towards your debt for a period of three years in the form of an income payment agreement (IPA). These policies have now changed. From the 1st of December 2010, if your disposable income is above £20, you will be required to pay all of this towards your creditors for a three year period. Why change? One of the reasons for the change is possibly to bring the bankruptcy payment policy more in line with the requirement for an individual voluntary arrangement (IVA). If you carry out an IVA, you will be expected to pay all of your disposable income towards your debts. To allow someone to declare themselves bankrupt and keep up to £100 of their disposable income could therefore have been regarded as unfair. Although we know that there is now a big problem with IVA's being constructed and proposed unfairly. However even after the changes, if you are asked to pay an income payment agreement after declaring bankruptcy, this will only last for three years compared to five years of payments in an IVA and then possibly six if the IVA company make you re-mortgage. The other view is that, the courts simply need to collect more money towards the administration of bankruptcies. However this view is flawed because we know that the government are going to be closing some county courts in England and Wales, ultimatley saving them monies in the process. We also saw a rise in the bankruptcy fee this year to £600 per person, a rise of £90 of which all went to the Insolvency Services part of the fee. Bankrupt before December One of the questions raised by the change in policy is what happens if you were bankrupt before December 2010? If you were declared bankruptcy before 1st Dec and currently have an income payment agreement in place this will continue as normal. If during the three year period, your circumstances change, the amount you pay will still be reassessed based on the old policy However, if you were bankrupt before December 1st and are not yet subject to an income payment agreement, if you circumstances improve, the new criteria will be used and you are far more likely to get an IPA. One concern about this is that it is likely to deter people who are already bankrupt from trying to improve their financial situation. This is a fair argument. However in reality this will only affect a relatively small number of people and the government is more concerned about the potentially huge number of people who are likely to declare themselves bankrupt in the coming months and years. Not an easy option Although the recent changes will put more onus on people who have declared bankruptcy to repay some of their debt, bankruptcy must still be seen as sensible solution for many people. Debt is written off after twelve months and if you cannot afford to pay anything towards the money you owe, you will not have to. Bankruptcy is not an easy option, but it will make you debt free, and with the right advice from professional impartial companies like ourselves, people can rest assured that they will be ok knowing that their debt problems have been dealt with fairly and properly. If you have any debt concerns and need advice please call us now on 0333 666 0 666 Share this blog entry:
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