Published in Debt Advice Features on Friday, March 30 2007

Your bankruptcy trustee is charged with administering your bankruptcy, dealing with any assets you have an trying to raise as much money as possible to pay your debts out of any money raised. The Trustee will have to carry out an investigationӔ into your financial affairs. This would include determining if you could make contributions into your bankruptcy.

The bankruptcy will not ask you to make contributions nor will her or she apply to the court for an IPO to made if it would leave you and your family (family is determined by everyone who lives with you that depends on you, children and any adults who do not have an income) without enough money to cover your domestic living expenses.

The bankruptcy trustee will assess your financial position and make a decision on how much you could afford to pay based on your answers from the income and expenditure you would complete, you would be allowed living costs that are not excessive known as “domestic living costs”.

If after you have covered your domestic living costs, you have surplus income then the trustee will ask for a percentage of that income (usually 50%), however there is no fixed amount for an IPA or IPO and each case is assessed based on individual circumstances.

As part of the income and expenditure you would need to provide details of all you income, including contributions from other members of the household.

You would have to complete and income and expenditure prior to petitioning for bankruptcy in your “Statements Of Affairs” and in a questionnaire once you are declared bankrupt.

The Statement of Affairs and the questionnaire ask for details of how much you earn, any benefits you receive and any other contributions from other members of the household.

In addition to this you would need to outline what you spend on a monthly basis on your day to day living costs, (rent, food, clothing etc.)

You will be asked to provide proof of your income and on occasion your spending, such as payslips, utilities and tenancy agreements.

Your bankruptcy trustee will check and assess your monthly spending to ensure that you are not over spending or over budgeting, they are ensuring that the spending in your current circumstances that the payments are reasonable costs and not excessive expenditure.

The bankruptcy trustee will then deduct your monthly reasonable spending (in some cases they will bring any excessive spending down to within certain guidelines such as national averages or the Insolvency Service guidelines) from your income to see if there is any surplus income or disposable income.

If there is then the trustee will normally ask you to contribute around 50% of your surplus income into an IPA or IPO (if an IPA is not agreed)

If your main source of income is from state benefits then it is unlikely that the bankruptcy trustee will ask you to make payments into an IPA. The main reason for this is that state benefits have been calculated so that the income you get form them covers your living expenses, you should not have any disposable income left over.