Income Payments Orders/Income Payments Agreements (IPO/IPAs) 

Q: Is sanction required to vary an income payments agreement?

No, following section 310(A)(6) of the Insolvency Act 1986, The Insolvency Service takes the view that it is not necessary to obtain sanction to vary an income payments agreement. 

Q: How is an income payments agreement enforced post-discharge? 

A: Section 333 imposes a duty on a bankrupt to co-operate with the trustee even after discharge. Failure to do so is a contempt of court. It follows that where has been a serious loss to the creditors because of non-payment, consideration may be given to reporting the contempt to the court. Post-discharge enforcement could also take the form of applying for an Attachment of Earnings Order or, varying the agreement so that the debtor’s employer pays monies direct to the trustee.

Bankrupt’s Home 

Q: What happens if a bankrupt fails to disclose a property? 

A: Section 283A (5) provides that:

‘If the bankrupt does not inform the trustee or the official receiver of his interest in a property before the end of the period of three months beginning with the date of the bankruptcy, the period of three years mentioned in subsection (2)-

(a) shall not begin with the date of the bankruptcy, but

(b) shall begin with the date on which the trustee or official receiver becomes aware of the bankrupt's interest’ 

Q: What if it takes longer than three years to deal with the bankrupt’s home? 

A: Section 283A (6) allows a trustee to apply to the court to extend the three-year period. 

Q: How do you deal with a property with a value of less the £1000? 

A: Each case should be dealt with on its own merits and this is a matter for the trustee to decide upon.  However Section 283A and its associated rules cater for the position where revesting the interest in the bankrupt can be done within the general three-year period.  

Bankruptcy Restriction Orders (BROs) 

Q: Is the 12-month period for making a BRO application set in stone? 

A: No, there are exceptions.  The timing of application for a BRO is detailed in paragraph 3 of Schedule 4A, and provides:

‘(1) An application for a bankruptcy restrictions order in respect of a bankrupt must be made-

(a) before the end of the period of one year beginning with the date on which the bankruptcy commences, or

(b) with the permission of the court.

(2) The period specified in sub-paragraph (1)(a) shall cease to run in respect of a bankrupt while the period set for his discharge is suspended under section 279(3).’ 

Q: What is the difference between risk-taking and recklessness? 

A: We expect that case law on BROs will develop so that levels of misconduct will be banded along the lines of the CDDA Sevenoaks case.  If so, blameworthy conduct is likely to fall into the lowest band and ‘dishonest’ conduct into the top band, leaving the middle band for other types of conduct.

Fast Track Voluntary Arrangements (FTVAs) 

Q: What will happen if an FTVA fails? 

A: It depends on the circumstances surrounding the failure; if there is a genuine reason such as ill health, the FTVA can be terminated or deemed to have failed. Where the FTVA fails as a result of a wilful default by the debtor, the Secretary of State or official receiver will petition for bankruptcy because this is a public interest matter.  

Q: How will the Official Receiver decide if a case is suitable for an FTVA? 

A: In general terms, an FTVA should provide a greater return to the creditors than would be generated in the bankruptcy proceedings. 

Section 263B (2) also sets out that the OR should be of the opinion that the IVA has ‘a reasonable prospect of being approved and implemented’. This is similar to the criteria set out for an IP to decide on suitability (Section 256). 

Further information on FTVAs is contained in the publication ‘Fast Track Voluntary Arrangements (FTVA)’, available on this website, using the following link: Fast Track Voluntary Arrangements (FTVA).

Banking 

Q: Can IPs use bank accounts other than the ISA? 

A: Under the new financial regime, from 1/4/04 voluntary liquidators have a choice whether to bank with the ISA or not. In exercising this choice, IPs will wish to be aware of the new interest provisions for estate funds in the ISA: from 1/4/04, all funds will qualify for interest and all the interest earned on ISA funds will be payable on estate deposits. The ISA rate of interest is planned to be around the level of the Bank of England base rate and that level is being achieved to date. 

In the case of bankruptcies and compulsory liquidations, the requirement to bank in the ISA remains.  

Q: Where can I find out more about banking with the ISA? 

A: For those with ready access to the internet, information about banking with the ISA can be found on The Insolvency Service website http://www.insolvency.gov.uk . From the home page click on the “insolvency practitioner Banking” link that is located in the column on the right hand side headed “Search this Site”.  Alternatively, IP Banking Section’s dedicated Customer Service Team will be happy to deal with enquiries on: 0121 698 4266/4268/4269.  

If anyone has any further questions regarding the Seminars they can be emailed to Dear.IP@insolvency.gsi.gov.uk