When you have been declared bankrupt there are various restrictions and obligations that are applied to you. In most cases the restrictions last for the duration of you bankruptcy, but some may continue even once you have been discharged from your bankruptcy.
When a person is declared bankrupt the standard duration is now 12 months. This is not always the case as the Official Receiver has powers to extend the bankruptcy period and to also apply restrictions that can last up to 15 years.
One of the most common restrictions in bankruptcy is an income payment order (IPO) or an income payment agreement (IPA). This is applied by the Official Receiver after assessment of your income and expenditure where they feel that you have disposable income available.
Bear in mind that your pre-bankruptcy expenditure includes payments to your creditors so when these are suddenly taken away you may have excess and disposable income. You are allowed various standard pieces of expenditure such as utilities, mortgage/rent payments, clothing and so forth.
You will not be allowed what are considered to be luxuries. Expenditure such as socializing, tobacco, Sky TV, gym membership will not be allowed. You are given a small amount of disposable income per month to cover things such as tobacco, but this disposable amount of money will be quite low. There are also set amounts that you are allowed in relation to food shopping, clothing, petrol etc. In many cases when a person completes the income/expenditure section of their bankruptcy petition without taking advice the Official Receiver may reduce any amounts that you have over allowed on. In our experience they will not mention the other allowances that are agreeable to them and in most cases a payment order is then applied.
The worst thing about this situation is that the payment order lasts for 3 years and while under the restriction of a payment order any increase in your income will result in an increase in the payment order. On the other side of the coin any decrease in your income can mean that the payment order is no longer valid and has to stop.
When you use our specialist service we will help and advise you with regard to your income and expenditure and make sure that you have the full allowances that are available. In many cases people simply do not factor things such as haircuts into their expenditure and this is an allowable expense within bankruptcy.
Talk to one of our trained advisors or complete our short enquiry form on the left of this page for further help and information regarding your situation.
Bankruptcy Restriction Orders (BRO or BRU)
A Bankruptcy Restriction Order or a Bankruptcy Restriction Undertaking can also be applied during bankruptcy by the Official Receiver. These are normally applied where the Official Receiver feels that the person has increased their debt when they knew that there was no reasonable prospect of repayment.
They may be applied if, for instance, you lost thousands through gambling or took out further loans when you realized that you were insolvent.
These orders can last for up to 15 years and will affect the person’s ability to obtain credit or run a company. The bankruptcy itself may be discharged but the restrictions can still apply for some time.
General Restrictions in Bankruptcy
While you are under the bankruptcy order there are various restrictions applied. You cannot be a director of a Limited company for instance and if you ask people for credit above £500 you must make sure that the person knows you are currently bankrupt.
If you come into money or are entitled to some form of inheritance you must inform the Official Receiver.
If you move address or change jobs you must inform the official Receiver. The same applies if your income increases or decreases. Once you are clear of bankruptcy these standard restrictions are lifted.
Contact us for further information on bankruptcy restrictions.