December 2010

Chapter 31.7 Income payments agreements (IPAs) and income payments orders (IPOs)

Index and introduction

31.7.1  Index

This chapter is divided into the following parts and annexes:

Index and Introduction (paragraphs 31.7.1 to 31.7.5)

Part 1 - Introduction to income payments agreements (IPAs) and income payments orders (IPOs) (paragraphs 31.7.6 - 31.7.18)

Part 2 - Guidance on making an income and expenditure assessment (paragraphs 31.7.19 to 31.7.31)

Part 3 - Income to be considered in an income payments calculation (paragraphs 31.7.32 to 31.7.79)

Part 4 - Expenditure to be considered in an income payments calculation (paragraphs 31.7.80 to 31.7.125)

Part 5 - Implementing an IPA (paragraphs 31.7.126 to 31.7.149)

Part 6 - Applying to court for an IPO (paragraphs 31.7.150 to 31.7.160)

Part 7 - Review, variation and discharge of an IPA or IPO (paragraphs 31.7.161 to 31.7.178)

Part 8 - Enforcing an IPA or IPO following default – initial action by collection agent (paragraphs 31.7.179 to 31.7.182)

Part 9 - Enforcing an IPA or IPO following default – recovery action where bankrupt co-operates (paragraphs 31.7.183 to 31.7.188)

Part 10 –  Enforcing an IPA or IPO where the bankrupt is not co-operating (paragraphs 31.7.189 to 31.7.232) (issued August 2011)

Annex A – Assessment of real disposable income where the bankrupt's income is derived in part from state benefits

Annex B - Guidance on the assessment of real disposable income where the official receiver seeks to claim a lump sum payment

Annex C - Illustrative examples to support Annex B guidance where the official receiver seeks to claim a lump sum pension payment under an IPA/IPO

Annex D (April 2012) – IPA/IPO Expenditure Guidelines

31.7.2 Abbreviations

The following abbreviations have been  used in this chapter:

31.7.3 Income payments

One of the aims of bankruptcy is to relieve a debtor of unmanageable debt problems. A consequence of this is that the bankrupt, who no longer has to make payments to the majority of his/her creditors, may have a surplus income beyond that needed to meet the reasonable domestic needs of him/herself and his/her family. The trustee in bankruptcy, or the official receiver, is able to reach agreement with the bankrupt, or to obtain an order of court, for payments to be made from any surplus income to the bankruptcy estate for the benefit of the creditors.

31.7.4 Income payments orders (IPOs)

Income payments orders have always been a part of the 1986 Act [note 1]but the trustee requires an order of court to compel the bankrupt to make payments. The order can be obtained with or without the consent of the bankrupt.

31.7.5 The introduction of income payments agreements (IPAs )

In April 2004 (as a result of the enactment of The Enterprise Act 2002,referred  to in the rest of this chapter as EA2002) [note 2], the income payments agreement (IPA) was introduced to run alongside the IPO. Unlike an informal agreement to make voluntary contributions which would be unenforceable if the bankrupt didn’t make the payments, an IPA is a formally binding agreement between the official receiver or the trustee and the bankrupt that the payments set out in it will be made [note 3].

In effect, an IPA works in the same way as an IPO but removes the need for the trustee to make an application to court for an order with the potential for time delays that may ensue. The official receiver can enter into the agreement before a trustee is appointed which also means that payments are likely to commence at an earlier stage in the bankruptcy. With the reduction in the discharge period introduced by EA2002, it is hoped that in the majority of cases where the bankrupt has income in excess of expenditure, an IPA will be obtained. It is envisaged that an IPO will be sought only in those cases where the bankrupt fails to consent to the proposed IPA or fails to co-operate with the collection of an IPA.

[On to Part 1 Introduction to income payments agreements (IPAs) and income payments orders (IPOs)]