Income Payments Orders and Agreements (IPO/IPA) After Bankruptcy

Last updated: 7 May 2026

Quick answer

An Income Payments Order (IPO) or Income Payments Agreement (IPA) is the mechanism by which a bankrupt with surplus income pays a portion of that income to the trustee in bankruptcy for the benefit of creditors. It runs for up to 36 months from the order or agreement date — which can extend beyond the standard 12-month bankruptcy discharge. The trustee proposes an IPA at the bankrupt's interview; if no agreement is reached, the trustee can apply for an IPO from the court under section 310 of the Insolvency Act 1986. The Income Payments Calculator (the Insolvency Service's framework) applies a "reasonable domestic needs" allowance and a 50/50 split of any surplus. The IPO/IPA cannot reduce the bankrupt's income below the level needed for reasonable domestic needs. Variation is possible if circumstances change — particularly drops in income from job loss, illness, or family change.

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What surplus income means in bankruptcy

Section 310(7) of the Insolvency Act 1986 defines "income" as every payment in the nature of income made to the bankrupt during the period of bankruptcy. Section 310(2) gives the court power to make an IPO at any time before discharge, and section 310(6) caps the order's duration at three years.

The Insolvency Service's Income Payments Calculator framework (used by Official Receivers in practice) calculates surplus income as:

Income (net of tax)
- Reasonable domestic needs (housing, food, transport, utilities, council tax,
  childcare, debt payments, basic clothing, basic recreation)
= Surplus income

50% of surplus → IPO/IPA payment to trustee
50% of surplus → bankrupt retains

Reasonable domestic needs are assessed against the Standard Financial Statement trigger figures, which the OR uses as a benchmark. Spending above the trigger figures is not automatically excluded but requires explanation. Spending below the trigger figures means more surplus, hence more IPO.

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IPA versus IPO

An IPA is a voluntary agreement between the bankrupt and the trustee (Official Receiver in most cases). An IPO is a court order obtained where no agreement is reached or where the bankrupt fails to honour an agreement.

Most cases settle as IPAs. The OR's interview produces an income/expenditure analysis; the bankrupt agrees a monthly payment; the IPA is signed and runs.

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When is an IPO/IPA appropriate

The trigger threshold has historically been around £20 a month surplus (current practice may vary — check current Insolvency Service Technical Manual guidance) — below that level, the OR generally does not pursue an IPA because the administrative cost of collection exceeds the recovery. For surplus income at £20-£200 a month, an IPA is the standard outcome. Above £200 a month, the OR engages more closely; the IPA period may be the full 36 months.

The OR considers:

• Stability of income (someone with variable self-employment earnings may have IPA terms varied to a percentage of income rather than a flat amount)
• Imminent income changes (impending job loss, retirement, return from maternity leave, end of a fixed-term contract)
• Existing ongoing obligations (childcare, school fees, ongoing therapy, professional fees that are necessary to maintain income)
• Reliable ability to pay (where the bankrupt has been chronically unable to meet basic outgoings, an IPA is futile)

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What "reasonable domestic needs" includes

The Insolvency Service guidance (broadly aligned with the Standard Financial Statement) treats the following as reasonable household expenditure for IPA purposes:

What is NOT typically allowed:

• Saving above modest amounts
• Pension contributions above the soft ceiling
• Discretionary travel or holiday spend above modest levels
• Premium subscriptions (Sky Sports, Netflix premium tier, etc.) where multiple are stacked
• Mortgage capital repayment above a sensible level (interest is allowed; capital is treated as savings beyond a certain threshold)

The OR has discretion. Where particular spending is essential to the bankrupt's circumstances (autistic children, elderly relatives, professional certification fees), the OR can allow it with explanation.

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Variation when circumstances change

An IPA or IPO can be varied where circumstances change. Common variation triggers:

• Income drops — job loss, redundancy, illness, reduced hours
• Income rises — promotion, new job, end of maternity leave
• Outgoings change — childcare ends or starts, mortgage rate change, divorce
• Health change — chronic illness affecting earning capacity

For an IPA: the bankrupt contacts the OR with evidence of the change; the IPA is varied by agreement. For an IPO: the bankrupt applies to the court under section 310(6A) for variation, supported by witness statement and evidence of the change.

The trustee can also seek variation upward where the bankrupt's income rises above what was assumed.

Where an IPO/IPA is in force at the time of automatic discharge (12 months after bankruptcy order), the IPO/IPA continues to run for its full 36-month term — discharge ends most bankruptcy effects but does NOT end the IPO/IPA.

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Defending an IPO application

If the OR applies for an IPO and the bankrupt disagrees, the bankrupt files evidence in response. The defence focuses on:

1. Income calculation — challenging the figures used (gross vs net, tax/NI calculations, fluctuating self-employment income)
2. Outgoings — explaining outgoings the OR may have disallowed (essential professional fees, dependant care, health-related)
3. Period — arguing for a shorter period than 36 months
4. Amount — arguing for a lower percentage of surplus

The bundle for the contested hearing:

├── Section A — Pleadings (OR's application; bankrupt's response)
├── Section B — OR's evidence (bankrupt's interview transcript, payslips, bank statements, OR's calculation)
├── Section C — Bankrupt's evidence (witness statement, payslips, bank statements,
│             evidence of disputed outgoings, evidence of imminent change)
├── Section D — Authorities

Hearing usually runs 30-90 minutes in the County Court hearing centre with insolvency jurisdiction. Costs follow the event.

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What happens at the end of the IPO/IPA period

At the end of 36 months, the IPO/IPA terminates. The bankrupt is fully out of the surplus-income obligation. Any further income improvements are the bankrupt's own.

If the bankruptcy was already discharged at 12 months and no BRO/BRU was made, by month 36 the bankrupt has fully exited bankruptcy obligations. The bankruptcy entry comes off the public register (3 months after discharge), though the credit-reference agencies hold it for six years from the bankruptcy order.

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How BundleCreator helps

BundleCreator's Bankruptcy template handles IPO defence bundles with pagination, OCR, hyperlinked index, and section bookmarks. Output is ready for the County Court hearing centre with insolvency jurisdiction or the ICC.

For routine IPA negotiations there's typically no court bundle needed — the IPA is signed in correspondence with the OR. BundleCreator's role kicks in if the IPA breaks down or the OR applies for an IPO.

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Frequently asked questions

Does an IPA stop me from claiming benefits?

No. Benefits paid to the bankrupt are part of income for IPA calculation, but they are protected from being taken in full — the IPA cannot reduce the bankrupt's actual receipts below the reasonable domestic needs level. Universal Credit, ESA, JSA, PIP, and DLA flow normally; the surplus calculation factors them in.

Can my employer find out about my IPA?

The IPA itself is not on the public register. The bankruptcy is on the public register for 12 months (plus 3 months post-discharge), but the IPA terms are held on the Insolvency Service file, not published. Employers who run public register checks see the bankruptcy; they do not see the IPA period directly.

Can I refuse to engage with the OR's interview?

The Insolvency Act 1986 imposes a duty to co-operate (section 333). Refusing to attend the interview is likely to lead to a BRO application as well as an IPO. Attending — even disagreeing on the figures — is the safer course.

What if I'm self-employed and my income fluctuates?

The OR will typically calculate IPA payments as a percentage of monthly income (e.g. 50% of any month's surplus over a threshold) rather than a flat amount. You declare each month's income, and the IPA calculates accordingly. This protects you in low-income months but means you pay more in good months.

Does bankruptcy discharge end my IPA?

No. The IPA runs for its agreed term (up to 36 months) regardless of discharge. Discharge at 12 months ends most bankruptcy effects (you are no longer "an undischarged bankrupt"; the bankruptcy comes off the register at month 15) but the IPA continues.

Can I pay off the IPA early?

You can offer the OR a lump sum equivalent to the remaining payments. The OR usually accepts where the lump sum is reasonable. This is sometimes funded by family — a "bankruptcy buyout" arrangement that gets the bankrupt fully clear sooner.

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Further reading

• Insolvency Act 1986 — particularly section 310 (IPOs) and section 310A (IPAs)
• Insolvency Service — Bankruptcy guidance
• Standard Financial Statement — Money Advice Service tool used as outgoings benchmark
• Bankruptcy Petition vs Debt Relief Order: How to Choose in 2026
• How to Apply for Your Own Bankruptcy: 2026 Online Application Walkthrough
• Bankruptcy Restrictions Orders and Undertakings: Defending the BRO/BRU