A reader has asked:
I have been offered redundancy. I would like to retrain for a more interesting job, but I still have nearly a year of IPA payments to make, so will the Official Receiver take all my redundancy pay?
It depends on your discharge date
The answer to the question depends on whether the last day of employment is before or after the date of discharge from bankruptcy. There are three cases:
- the last day of your employment is before you went bankrupt In this case the redundancy pay is treated as an asset that you owned when you went bankrupt and it therefore belongs to the Official Receiver (OR).
- the last day of employment is after bankruptcy but before discharge Here the redundancy pay is treated as an “after-acquired asset“. You are obliged to notify the OR about this and the OR will arrange for it to be paid to him.
- the last day of employment is after discharge In this case the money does not go to the Official Receiver as an asset, it belongs to you. This applies even if you have a Bankruptcy Restriction Order.
The reader didn’t give specific dates, but as he will have been discharged after 12 months and as Income Payments Arrangements run for 3 years and his has only a year to go, it is clear that he must already have been discharged. In this case he will be able to keep his redundancy pay.
What happens to the IPA?
The redundancy money is not counted as income, so he won’t have to use it to keep paying the agreed IPA. Instead he should inform the Official Receiver of his new income, which whilst he is retraining and then looking for a new job will probably be a lot lower. The OR will then recalculate the IPA and this may well cease.
What about benefits?
If his income is lower, he may be entitled to some benefits to help. It is difficult to say much here without knowing the specific family circumstances and what the ‘retraining’ will involve. Broadly the having money in the bank from a redundancy payment will not affect non-means-tested benefits, which for someone being made redundant would include Contribution-based Job Seekers Allowance, but it may affect means-tested benefits such as Housing Benefit.
Go to your local Citizens Advice Bureau if you would like to know what you are entitled to and how any of the options for retraining might affect this.