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Debtdummy
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United Kingdom
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 Posted - 23 March 2007 : 17:31:07
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Part 3 - IPAs IMPLEMENTATION
December 2006
31.7.40 Calculating the bankrupt's contribution
Once the real disposable income has been assessed, i.e. the income remaining after all expenditure necessary to finance the reasonable domestic needs of the bankrupt and his/her family (see Part 2 of this chapter), 50-70% of this should be sought by way of monthly payments under an IPA. Generally, the higher the real disposable income, the higher the percentage which should be sought. Guidance as to what amount is appropriate is provided in the Income Payments Calculator (available on the Technical Section intranet site) and Technical Notice 31/03 - Annex 2 IPO/IPA Table.
The official receiver/trustee may be able to make an initial calculation of surplus income based on the debtor's statement of affairs/ information in the preliminary information questionnaire. To assist in calculating the proposed IPA/IPO contribution, reference can be made to the Family Expenditure Survey and Income Payments Calculator (both available on the Technical Section intranet site) into which relevant income and expenditure can be entered. See also Part 2 of this chapter and Technical Notice 31/03- Annex 2 IPO/IPA Table. Whilst the guidance is provided to assist in ascertaining an appropriate contribution under an IPA/IPO, it must be remembered that each bankrupt's case must be considered on its own merits, taking in to account all available information with regard to the individual's income and expenditure.
Wherever possible the amount to be agreed as a contribution under an IPA should be discussed and agreed with the bankrupt to ensure that all income which can be considered has been included, and the bankrupt's reasonable expenditure considered.
31.7.41 Letter to bankrupt enclosing IPA
It is not the bankrupt's responsibility to provide a draft agreement for consideration, it is for the official receiver or trustee to provide the agreement for the bankrupt's approval [note 1]. Form IPA can be presented at interview for the bankrupt to sign or it may be sent to the bankrupt for signature under cover of form IPALET, requesting that it be returned within 14 days. The official receiver may specify a longer period if it is deemed appropriate, over holiday times or the Christmas period, for example. If the bankrupt decides not to approve the agreement, he should notify the official receiver in writing of that decision within the same timescale as specified by the official receiver for return of the signed form. Form IPA has been revised to include the bankrupt's agreement to contact his/her employer if two consecutive payments are missed (see paragraph 31.7.49 ) and also confirms the bankrupt's continued obligation to make payments after discharge.
31.7.42 14-day "cooling off" period
The bankrupt is given a 14-day "cooling off" period to consider the IPA. This is not a statutory requirement, but reflects good practice followed in consumer credit agreements. Where the bankrupt signs the agreement at a face-to-face interview, the official receiver should take no further action for 14 days. If after 14 days, the bankrupt has not contacted the official receiver to withdraw consent to the agreement, the official receiver should sign and date it and on that signature, the IPA will come into force and become legally enforceable.
Where the IPA is sent to the bankrupt by post to be signed, the 14-day period will run from the deemed date of receipt by the bankrupt, that is 2 days after the date of dispatch by the official receiver and not from the date of the bankrupt's signature. This means, for example, that if the IPA is sent to the bankrupt on 1 September, the 14-day period will run from 3rd to 17th September, and if the official receiver receives the signed agreement from the bankrupt on any date prior to that, he/she need only wait until 17th September to sign. The official receiver/trustee must always bear in mind that Rule 6.192A(1) [note 2] provides that an IPA can only be entered in to before the discharge of the bankrupt, so care must be taken where an IPA has not yet been signed by both the bankrupt and the official receiver or trustee, and the bankrupt's discharge date is imminent (see also paragraphs 31.7.2 ,31.7.39 and 31.7.44).
31.7.43 Consent of bankrupt to the IPA
Once the official receiver/trustee has agreed with the bankrupt the amount to be collected under the IPA, the bankrupt's consent to the agreed IPA should be obtained in writing at the earliest opportunity, remembering that the IPA can only be entered in to prior to discharge and is only valid where it is both signed by the bankrupt and the official receiver/trustee prior to discharge (see paragraph 31.7.2) [note 3] [note 4] [note 5] .
31.7. 44 Bankrupt withholds consent to IPA
Where the bankrupt is prevaricating or refusing to sign the IPA and their discharge is imminent, if the official receiver/trustee is concerned there will be insufficient time to obtain a valid IPA, then he/she retains the option to apply for an IPO. Section 310(1A) of the Insolvency Act 1986 [note 6] provides that an IPO may be made on an application instituted before the date of discharge. In these circumstances, provided that the application for an IPO is initiated or commenced before discharge, the official receiver/trustee may consider that an application to suspend the bankrupt's discharge as a result of non co-operation may not be necessary.
31.7.45 Action following implementation of the IPA
Once the agreement has been signed and dated by the trustee or official receiver, a copy must be sent to the bankrupt [note 7] under cover of form IPAPAY, which letter also provides instructions for the payment of contributions under the IPA.
Where the agreement provides for payments to be deducted and paid over by a third party, a notice of the agreement must be sent to the third party. The notice must contain:
(a) the full name and address of the bankrupt;
(b) a statement that an IPA has been made, the date of it and that it provides for the payment by the third person of sums owed to the bankrupt to be paid to the official receiver or trustee;
(c) the full name and address of the third person;
(d) a statement of the amount of money to be paid to the official receiver or trustee from the bankrupt's income, the period over which the payments are to be made, and the intervals at which the sums are to be paid; and
(e) the full name and address of the official receiver or trustee and the address or details of where the sums are to be paid.
When making any such payment, the third party may deduct the appropriate fee towards the clerical and administrative costs of complying with the IPA but must notify the bankrupt in writing of the amount deducted. [note 8]
Information as to how to enter IPA/IPO details on LOIS following implementation of an IPA/IPO can be found in LOIS workbook IPAs & IPOs Screens 78 &32.
31.7.46 Attachment of earnings order in force prior to IPA
Where there is an attachment of earnings order in force against the bankrupt, the court may, if it thinks fit, discharge or vary such an order on the application of the bankrupt, the trustee or the official receiver in order to secure payments by the bankrupt [note 9]. The official receiver should give notice that he/she is seeking an IPA, accompanied by an explanatory letter to any judgment creditor having an attachment of earnings order against the bankrupt to ensure that the funds subject to that order come within the scope of the IPA.
31.7.47 Instructions to RTLU and collection agents
Once the IPA is effective, unless there are other assets in the case which mean that it is likely that the appointment of an IP trustee will be made, using form ICW (to ensure that consistent information is supplied in all cases), the official receiver should instruct the collection agents employed by the service by e-mail (see Case Help Manual part Income Payments Agreements, paragraph vii, Cases to go to RTLUs and the case must then be passed to the appropriate RTLU to monitor collection. The collection agents will acknowledge receipt of the instruction to the originating official receiver and provide their reference number. On receipt of the case, the RTLU should e-mail the collection agents to inform them that the case has now been transferred, the collection agents will then e-mail an acknowledgement to the RTLU.
Where there are other assets and a trustee is likely to be appointed, the official receiver should not neglect to take those steps necessary to secure the payments under the IPA pending the appointment of the insolvency practitioner. Should any payments be made by the bankrupt prior to notifying the collection agents, these must be included in form ICW so that they can be taken in to account. Any payment resulting from an NT coding being applied to the bankrupt's income should also be identified on the instruction sheet so that collection can commence as soon as the NT coding is applied by HMRC.
Should the collection agents (Clarke Willmott), be informed by the bankrupt that he/she is in receipt of a bonus payment from his/her employer, the collection agents will notify the relevant RTLU/official receiver with regard to this information. It will then be the responsibility of the RTLU/official receiver to take the matter forward regarding any action to collect the bonus payment if it is appropriate to do so. The collection agents will also inform the bankrupt that the relevant RTLU/official receiver's office will contact them regarding any action arising from this change in circumstance.
See also Case Help Manual part Income Payments Agreements, paragraph vii, Cases to go to RTLUs and part Income Payments Orders, paragraph ix, Cases to go to RTLUs.
[Back to Part 2] [On to Part 4]
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IPAs IMPLEMENTATION-PART 3
