A couple of readers have asked recently about whether it’s sensible to turn down a job or overtime when you are bankrupt. Two things matter in this sort of situation.
First, have you been discharged from bankruptcy? Almost everyone is discharged from bankruptcy after a year.
And secondly, do you have an Income Payments Agreement (IPA) set? In an IPA, you have to make monthly payments for three years. An IPA can only be set before you are discharged from bankruptcy. Most people who go bankrupt don’t have an IPA set!
Should you take a new, well-paying job?
Ms A asks:
I am currently out of work and I went bankrupt 6 months ago. I’ve got a chance for a job at 40k a year. If I start it now, will I have to pay back money for 3 years in an IPA? What would happen if I had the same chance at this job after the first year of bankruptcy?
If she takes a well-paid job now, it is likely that an IPA may be set and she will have to make payments for three years.
In that case, she would usually be much better waiting until she has been discharged from bankruptcy – then an IPA can’t be imposed and she won’t have to make any monthly payments.
Until their discharge, many people decide to try to improve their CV by taking a short course or by doing some volunteering work (if that won’t affect their benefits).
There are some important exceptions here:
- if Ms A’s benefits aren’t covering all her priority debts such as her rent or car finance, she may have little option but to take this job and accept she will have to pay an IPA.
- with a less well-paid job, she may not have any spare income to pay an IPA anyway.
- the hardest decision is if you are offered a great job and you are worried you won’t get one as good in a few months’ time.
Of course if you are offered a job and you are in receipt of benefits, you will probably have to take it to avoid your benefits being sanctioned. But it’s usually easy to make sure you don’t get offered a job that you don’t want.
Should you work overtime?
Mr B says:
I’ve been declared bankrupt and an IPA has been agreed. I earn the same basic pay each month. Overtime is possible, but I am opting not to pursue this. Due to this, my pay won’t change other than inflation pay rises.
This is normally a very sensible decision.
Once an IPA has been set, you usually lose all extra overtime payments that you get, as your IPA payments would be increased.
What is the point in working harder if you get no benefit whatsoever? Take it easy for the next three years, see more of your children, find some hobbies that don’t require much expenditure.
You are legally obliged to inform the Official Receiver (or the Trustee in Bankruptcy if your case has been passed to one) if you have a pay rise, even if it just for inflation.
But you can also inform them if your expenses have increased – council tax, bills, petrol etc, These may offset a small pay rise or they may exceed it, in which case your IPA should be reduced.
Not a sensible system!
This is a hopeless system the Insolvency Service has set up. There is no incentive in there for people to work harder, so they won’t.
This doesn’t help them, it doesn’t help their creditors and it doesn’t help the economy.
But those are the rules. If you are bankrupt, you aren’t obliged to earn extra money if it isn’t going to benefit you.
Further reading:
Bankruptcy / What happens when you are discharged?
Credit Scores / Repair your credit record after bankruptcy
Helen says
Mi brother was made bankrupt by a creditors in April 2020, discharged in April 2021 and then annulled on the basis the order should not have been made in July 2021. A PPI payment was made to the Insolvency Service whilst he was bankrupt. It was not used to pay creditors or fees. Is he entitled to claim this money back from the Official Receiver?
Sara (Debt Camel) says
I haven’t come across this situation and obviously I don’t know the reasons for him to have been able to argue that the order should not have been made.
But I would start by asking the OR to return the money. That may well work!
If it doesn’t, I suggests he talks to his local Citizens Advice to get help with this. They can get advice from the National Specialist Debt Advice Service if they need to.
Jonathan says
In Ms A’s case, is there another factor that, if she rejects a reasonable job offer, she is a risk of benefit sanctions if the DWP believe she has unreasonably rejected an employment offer?
But I agree, there’s no incentive to improve your situation – which is odd, given the policy pronouncements about rehabilitation not punishment at the time of the bankruptcy reforms!
Sara (Debt Camel) says
Yes if you reject an offer. But it’s pretty easy to not get offered a job you don’t want… I’ve updated the article to say this.
Michael says
Re turning down a job offer.
Another offer may not come later and if it does an unemployed person is a sitting duck to have a salary offer chiselled down. It happens often. Paradoxically an employed person is more re- employable elsewhere than an unemployed applicant, and cant have a salary offer pushed down below their current one. Unemployment also sees an erosion of skills in the eyes of a potential employer.
A salary of £x in one job can be a springboard to a higher one if the first is submarket. No potential employer will hold it against a candidate if they change jobs quickly because their current salary is under the going rate. Someone claiming income support is obliged to take a job offer if its reasonable: i do not know the sanction rules if any.
Sara (Debt Camel) says
Sone good points. As I said, you may feel if you don’t take this job, you may not get offered a similar one later when you are discharged.
Jeremy Wagg says
I’m afraid I think your advice to remain on benefits rather than taking a well paid job that has been offered is irresponsible at best, I’m surprised at you.
Sara (Debt Camel) says
Why?
Dean Russell says
Me personally, I would take the job especially if it is a well paid job even if it means paying into a IPA for a few years, yes I would do overtime, and then see how much better off I would be after the IPA have been deducted. It may not be as bad as one thinks.
Sara (Debt Camel) says
That would be your choice. Of course, if you do overtime for a few months and lose the extra money, you would probably stop doing it…
Steve says
Hi I earn 2000 a month including my overtime my partner earns 400. We have a 2 year old. I’m housing association rent 430 a month I run a car. Am I likely to have to pay into a IPA if I declare bankrupt? Around 20k of debt just over.
Sara (Debt Camel) says
Do you own this car or is it on finance? If you own it, how much is it worth?
Stephen says
Hi Sara, it’s my own car worth 1000 or less not on finance. Its needed to get to work and back so hoping I would keep it as buses don’t run for hours I sometimes have to work
Sara (Debt Camel) says
Then that shouldn’t be a problem in bankruptcy.
I can’t guess whether you might be likely to have to pay in an IPA – if you post a statement of affairs on the MSE bankruptcy forum, they may be able to estimate, see https://forums.moneysavingexpert.com/categories/bankruptcy-living-with-it.
Also bear in mind the likely increases to energy bills, council tax, national insurance etc. If an IPA is set it is flexible – it can be reduced when your costs go up.
If you can change the amount of overtime your work and an IPA is set, you can just reduce the overtime as the article above says.
You should also take advice on whether bankruptcy is your best option – – phone National Debtline on 0808 808 4000. Depending on what your detailed income & expenditure show, you may be eligible for a Debt Relief Order or you may possibly be able to manage without insolvency at all, with a debt management plan.
One thing you should rule out from what you have said is an IVA – you have no assets to protect and an IVA has exactly the same bad effect on your credit record as bankruptcy – it is no advanatages for you a lot of disadvantages.
Rebecca says
I was discharged in April and have and ipa in place, which I am maintaining and has about 30 months left.
What happens if I accept a new, better paid job and don’t tell them about the wage increase?
What will the consequences be if I’m found out?
How likely is it that I will be asked to provide payslips again?
Thanks
Sara (Debt Camel) says
It is a criminal offence. I’m not going to guess at the chance of you being found out but don’t be silly. You choice is to take the job and tell the OR or not take it.
If the new job is interesting with good prospects then you may want to take it anyway. If it’s more hours or a longer commute, possibly not.
If you bills and living costs have gone up, you can get th3 current IPA reduced.
Rebecca says
Thankyou. Would you tell them in advance or wait until you had the first wage?
Sara (Debt Camel) says
I would tell them as soon as you start The job an£ then update then when you are first paid.
And do make a note of any extra expenses you will have in new job. And how much your other expenses have gone up. Tell the OR/Trustee about these at the same time.
Jit says
Hi, I have declared bankruptcy and I have agreed to pay an IPA. However, I will be moving out of the UK as my VISA ends. Can the OR chase me outside EU/UK?
Sara (Debt Camel) says
Will you be earning less outside the UK?
Jit says
Yes, I will be earning less. But at the same time I will also need to save for buying a house there. What I need to know is that the bankruptcy restrictions that I am under now, will this also be valid if I am outside UK?
Sara (Debt Camel) says
The IPA rules and any bankruptcy restrictions still apply outside the UK/EU.
You can ask for the IPA to be reduced if you are earning less and/or have higher expenses. But not to allow you to save for a house.
Sam says
Re overtime, I have emailed the insolvency team to negotiate a 50 50 split on my overtime with the logic of all will benefit (myself, creditors and the insolvency team) worth a try I guess! I will update on what they come back with.
Sam says
Just a further update on this, the IPA and OR have agreed my offer of 50%. Just thought I would get this out there and hope this information helps someone in this situation.
Sara (Debt Camel) says
very good news for you!
NA says
Hi,
Recently been declared bankrupt have the interviews with OR and IPA team over the next few weeks.
I have recently changed jobs due to stress work/life balance which 100% has contributed to me going bankrupt due to this I know I will have no surplus income so an IPA cannot be given I also owe child maintenance arrears etc due to not having the money to pay the full amount at the time.
My question is if an IPA is decided not to be given, a few months down the line if I get promoted at work which is a good possibility and was the timeline discussed in my interview my wages will increase on telling the OR does that mean an IPA can then be given due to me not yet being discharged?
It just seems mad, they say a clean slate a big onus on the bankruptee remaining solvent but cannot earn more money?
What would happen if I did not tell the OR of my promotion? Do they check on discharge when an IPA is not in place?
Thanks
Sara (Debt Camel) says
if I get promoted at work which is a good possibility and was the timeline discussed in my interview my wages will increase on telling the OR does that mean an IPA can then be given due to me not yet being discharged?
Yes. Until you are discharged, an IPA can be set.
What would happen if I did not tell the OR of my promotion?
It is a criminal offence. Don’t even think about it.
AM says
Hi Sara
I went bankrupt last November and have taken time out of work for the 12 months in order to avoid having to enter into an IPA. I am starting to look for a job for later this year. If I sign a contract prior to Discharge, with a start date after my Discharge, would this have to be declared to the OR? And could that income which I start to receive after discharge from part of an IPA?
Hope that makes sense and thank you
Sara (Debt Camel) says
It does make sense, but I don’t know the answer.
If you go to your local Citizens Advice, they can find it out, getting advice from the national specialist debt advice service if necessary
Ross says
Hello
Hope all is well. I was forced into bankruptcy in December 2023. I’ve not had any correspondence from the OR yet. My other half has 2 horses which I pay towards the up keep. Can the OR make us sell them?
Sara (Debt Camel) says
You don’t own the horses so they can’t insist they are sold. But whether they treat you paying for their upkeep as an allowable expense is a different matter… did you take debt advice before going bankrupt?
Jake says
I was declared bankrupt in July 2023 and will be dischared July 2024. I have been unemployed since April 2023. I have not received any benefits. During my interview with the OR I was told “as of today you owe nothing”. I have now been offered a job starting in February 2024. Am I at risk of getting an IPA?
Sara (Debt Camel) says
Yes. You need To inform the OR of your change of circumstances
Richard says
Hi, i went bankrupt in February this year, I’ve completed all the forms online including my income and expenditure before I submitted the bankruptcy. I’ve since had my interview with the OR, I’ve had an email with forms to sign and send back and on the email it stated ‘we don’t need to interview you further and we are happy with everything’
My questions are:
1. Am I still due a call from the Ipa team? Or is that it now,? Unless my circumstances change
2. I haven’t yet had an NT tax code applied to my wages, is this likely to happen with it being so close to the end of the tax year.
Sara (Debt Camel) says
1. You will have to ask the OR’s office.
2. That is pretty unlikely. Not totally impossible though.
Barbara Newton says
Hi,
In November 2023 I was made bankrupt and because of my low income, I did not have to enter into an IPA. I have now started a new role which is a much higher salary, therefore I know I will now have to have an IPA and have spoken with the IS already.
My questions are –
1. I now have enough surplus income that after the three year term of the IPA, I will have cleared the original amount that the BR was for. Will that remove the BR from my file (as if it never existed and all debts satisfied) or will it remain?
2. If the BR will be completely cleared in the 3 year term, will they take the maximum amount from me each month that they say is available or just the amount that will satisfy the debt over the course of the IPA term?
Sara (Debt Camel) says
how large were the debts that went into your bankruptcy?
Andy says
Hi I’m looking at bankruptcy option for around 20k. I normally do quite a lot of overtime in summer. Could I cut my overtime for the first year. When my ipa is set. Then after discharge go back o working overtime. Without me giving it to or
Sara (Debt Camel) says
If an IPA is set in the first year, it lasts for 3 years and you have to report changes of income and overtime during that period
But if you can reduce your income so that no IPA is set in the first year, then after you are discharged you can earn as much as you want.
Do you think you will have spare income each month when you no longer have to make any payments? If you won’t have much spare, it’s possible a Debt Relief Order may be better for you. Talk to a debt adviser about your options, eg phone National Debtline on 0808 808 4000