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Debtdummy
Junior Member
United Kingdom
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 Posted - 23 March 2007 : 17:45:32
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Part 10- IPOs OPERATION OF THE ORDER AND DEFAULT IN PAYMENT
December 2006
31.7.73 Initial action
The order will either require the bankrupt to make the payments, or require his/her employer or other person regularly paying his/her income to pay the amount due to the trustee out of the income due to the bankrupt. In most cases the trustee should normally seek the order in the first instance against the bankrupt, requiring him/her to pay, and the due date of the payment should be agreed with the bankrupt, normally shortly after "pay day" each month.
31.7.74 Action following default in payment
An IPO is an enforceable order [note 1]. Where the IPO is being collected by agents, and the bankrupt has missed one payment, the collection agents employed by The Service, Clarke Willmott, will issue the first reminder letter. In the event that the bankrupt still fails to make payment at the next due date, Clarke Willmott will issue the second reminder letter. If the bankrupt still fails to make payment, Clarke Willmott will notify the relevant RTLU/official receiver for them to make a decision as to the next course of action.
If the bankrupt notifies the collection agents that he/she has temporary financial difficulties and the agents are satisfied that there is a reasonable expectation that the arrears can be recovered within a short period, the collection agents have discretion to agree revised terms under which missed payments can be collected, without reference to the appropriate RTLU/official receiver. Whilst any revised terms for repayment of the arrears may continue beyond the date of discharge, they cannot extend beyond the period of three years from the date the IPO originally came in to force [note 2].
Where the situation cannot be resolved by the agents in this way or if the problem is more permanent, such as loss of employment, a permanent reduction in the bankrupt's income or permanent increase in expenditure, the agents will report the situation to the RTLU. It will be for the official receiver, as long as he/she remains trustee of the bankruptcy estate, to act upon that information. The agent can provide the official receiver with information to enable a further application to be made to the court, but the agent will take no part in the drafting process.
If the RTLU is satisfied that an IPO is no longer appropriate, because of the loss of a job or a substantial drop in income, the RTLU will inform the bankrupt that payments will be suspended until the situation improves, with a reminder that the bankrupt must notify the RTLU if things improve before the term of the IPO expires. Where the bankrupt has provided a full explanation throughout, and subsequently informs the RTLU/official receiver that he/she is again in a position to make payments under the IPO, the payments will re-commence from that point and no attempt will be made to collect the missed payments, although the RTLU/official receiver may need to consider varying the amount to be paid under the order if the bankrupt's circumstances have improved.
If the circumstances of the bankrupt do not improve during the period of the IPO and no further payments are received before the expiry of the IPO (which can be no later than three years from the date the IPO was made), the IPO will be treated as lapsed by the RTLU and no further action taken.
Where a reasonable evidenced response is received indicating that the a reduced IPO is appropriate, the RTLU will agree to vary the order to accept reduced payments and will prepare an application to court to vary the IPO. The RTLU will liaise with the originating official receiver who will be requested to attend at court for any variation of the IPO, although all paperwork will be prepared and served by the RTLU (see also this chapter Part 11 concerning variation of the IPO).
Where no response is received or the explanation provided is inadequate, the RTLU will prepare an application to court to vary the IPO (form IPORAV) so that the bankrupt's employer or another third party makes the agreed payments under the IPO, [note 3] and will liaise with the originating office for a court date. The local official receiver will be requested to attend the court hearing for the variation application but the RTLU will prepare and serve all necessary paperwork.
Once a variation of the IPO has been granted the RTLU should send a copy of the varied order to the bankrupt and payor (employer or third party). Once the "payor of the relevant income" has notice of the order, he/she is obliged to comply with it [note 4]. Receipt of the order is likely to be the first notice to the payor that he/she has become involved in the IPO. The Insolvency Rules [note 5] allow the payor to deduct an administration fee from the payment on passing it to the trustee but must provide written notice of this to the bankrupt. The "employer" is obliged to notify the trustee "forthwith" if he is no longer liable to pay the bankrupt e.g. if the bankrupt's employment ceases. The income payments order may be set aside by a without notice application. This would cover the situation where an order has been inappropriately made or the payor is no longer liable to pay the bankrupt.
Where it is not possible to deal with a default in payment by means of direct payment from a third party/employer and payments under the IPO have lapsed without any explanation, the RTLU/official receiver should ask the bankrupt to complete a further income payments questionnaire (form IPOQ). If the IPOQ is returned and shows the bankrupt is still able to make payments from his/her income and there is no valid reason why the contributions have ceased, the official receiver/trustee should seek to vary the order (see this chapter Part 11) to recover the arrears outstanding . To do this it will be necessary to calculate the total amount to be collected under the original IPO and deduct the amount of any payments already made. Once this outstanding amount has been established, the required monthly contribution needed from the bankrupt to repay this outstanding amount can be calculated, bearing in mind that any variation of the IPO can extend beyond discharge but cannot extend beyond the period of three years from the date of the original order [note 6].
If the bankrupt is not in a position to make high enough repayments for each of the remaining months (up to three years from the commencement of the IPO) to meet his/her total outstanding obligation under the existing order, then the IPO repayments should be varied to the maximum monthly amount that he/she can afford (making sure this still allows the bankrupt sufficient monies to cover his/her reasonable domestic needs and those of his/her family). If the bankrupt can provide valid evidence that his/her total liability under the original IPO should now be reduced, the total amount to be collected under the IPO can be varied to reflect that and the repayment amounts calculated against the revised total.
Alternatively, where the IPOQ indicates that the bankrupt's circumstances have now altered sufficiently to allow him/her to repay an amount above that required to meet his/her outstanding total obligation under the original IPO, the IPO can be varied to reflect the increased total amount to be collected (within the three year period of the original IPO), and the bankrupt's monthly payments can be varied to the higher amount to meet this increased total for the remaining period of the original three year agreement. The calculation of the bankrupt's contribution must always take in to consideration the reasonable domestic needs of the bankrupt and his/her family.
If a shortfall against the original total to be collected under the IPO (or a shortfall against the revised total if applicable) still remains at the end of the three year period of the order, the debt outstanding is still enforceable against the (former) bankrupt. The trustee can apply to court for a judgment against the (former) bankrupt for any outstanding arrears remaining at that date under the (expired) IPO and then apply to court for an attachment of earnings order to recover the judgment debt from the former bankrupt [note 7].
Following default in payment under an IPO, suspension of discharge whilst still an option, will only be considered in the most extreme cases. An application for suspension of discharge is unlikely to be an effective way of obtaining compliance with the terms of the IPO particularly as most bankrupts will be discharged within 12 months of the date of the bankruptcy order.
[Back to Part 9] [On to Part 11]
All I have left is my sense of humour. |
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IPOs ORDER AND DEFAULT IN PAYMENT-PART 10
