What happens if my circumstances change during a personal insolvency procedure?

June 25, 2016

If you have entered a personal insolvency procedure and your circumstances have altered, you may be wondering if the terms of that procedure can be changed. The terms and conditions of individual insolvency procedures state what happens in those circumstances, but it is often the case that amendments are allowable to the original repayment plan.

Personal insolvency procedures generally last for a minimum of one year, so it is fairly common for someone’s circumstances to change during this time period. Life events such as redundancy, family inheritance, or a lottery win can all potentially affect your financial status, so what happens in these instances?

A change in income and the loss of your job

The original repayment agreement would have been based on the amount of income you received at the time it was entered into, taking into account your essential living costs including rent or mortgage, food and utility bills.

So a rise in wages will probably result in an increase to your monthly payments, to reflect the extra money at your disposal. On the other hand if your income has dropped, the Trustee may choose to reduce your payment amounts for a while, or suspend them on a temporary basis.

Once a personal insolvency procedure is underway, the repayments should be affordable and always take into account your essential living expenses.

Receiving a lottery windfall or inheritance

A windfall might include a win on the lottery, or a family inheritance for example. In such cases, it is likely that you will have to pay the money over to your Trustee in order to boost the returns for creditors, and also help to cover the costs of your insolvency procedure.

If the windfall happens to be more than the amount you owe, you should be able to retain the excess money. The situation can be a little more complex if you have lost your job and the money is part of a redundancy package, however, as your ongoing ability to work and make monthly repayments from wages will need to be factored in.

Scotland Debt Solutions provides confidential and independent debt advice to people in Scotland. We operate from five offices around Scotland – in Glasgow, Edinburgh, DundeeAberdeen and Inverness – and have a team of debt experts ready to help. Call us for a same-day meeting to discuss your situation.

John Baird

Insolvency Adviser

Tel: 0800 063 9250

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