Can an Attachment Of Earnings Order be made following bankruptcy?

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Can An Attachment Of Earnings Order Be Made Following Bankruptcy? Absolutely it can. It is a legal insolvency proceeding that can be brought by the County Court against anyone who does not keep up with his or her payments to the courts, as outlined in their “County Court Administration Order” (CCAO).

Let us remind ourselves what a County Court Administration Order is: It’s an alternative to bankruptcy. While certainly the most well-known of all the debt options, “Bankruptcy” is not necessarily right for every scenario that a court hears, nor is it the simple default option – just because you find yourself in debt doesn’t mean you have to become bankrupt.

As long as you owe no more than £5,000 to at least two creditors AND one of your creditors has obtained a court judgement against you that you cannot pay in full, then you might be allowed to make weekly, monthly, or quarterly payments (from your income) to the court, proportional to what each creditor is owed. This is known as a CCAO.

Clearly, a CCAO is intended to help the debtor and as such should not be broken by failing to keep up with payment plans stipulated therein. But if you did, not only will the CCAO be revoked but your creditors would also be able to resume pursuing you for the money still owed them.

And let us, in turn, ascertain what an “Attachment Of Earnings Order” is: A court directive, issued following any breach of a debtor’s CCAO, requesting their employer automatically deducts an amount of the debtor’s wages and pays it directly to the courts. The court then distributes this money to each creditor the debtor owes.

While there’s no upfront fee, the court will take 10p from every £1 handed-over by the employer, and the employer shall make a £1 admin charge for each deduction they have to make.

The sort of debts that may be subject to an “Attachment Of Earnings Order” include: credit cards, bank loans and hire purchase debts; student loan debts; income tax, VAT or TV License debts; rent or mortgage arrears. However, an Attachment Order cannot be applied if you, the debtor, is: self-employed or unemployed, in the Armed Forces or Merchant Navy.

In order to work out exactly how much of your income is deducted from your wage under an “Attachment Of Earnings Order”, the court calculates how much money you need to live on – called the “Protected Earnings Rate.” Your income is not allowed to fall below this threshold so any money owed can only be deducted from money earned above this amount.

Therefore, the times when an “Attachment Of Earnings Order” cannot be applied to a debtor is if their “take-home” pay is always less than their “Protected Earnings Rate”, or, the debtor owes less than £50 pounds.

Lastly, in Scotland an “Attachment Of Earnings Order” is known as an “Earnings Arrestment”. The differences being the creditor must have first served a “Charge Of Payment” and delivered a “Debt Advice and Information Package”. Otherwise, any “Earnings Arrestment” is deemed illegal. 

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