Part 5 Implementing an IPA and instructing collection agent
The official receiver/trustee may be able to make an initial calculation of surplus income based on the debtor's statement of affairs and/or information in the preliminary information questionnaire (PIQ). It is essential that all income received by the bankrupt and additional income received towards household expenses from others is included in the income payments calculation, and also all expenditure necessary to cover the reasonable domestic needs of the bankrupt and his/her family must be taken into consideration. To assist in calculating the proposed IPA/IPO contribution, reference can be made to the HES (available on the Technical Section intranet page), and income and expenditure can be entered into the relevant income payments calculator depending on whether it is a new agreement made on or after 1 December 2010, or the variation of an existing agreement made before 1 December 2010. See also Part 2 of this chapter.
For all IPAs agreed on or after 1 December 2010, where the bankrupt has surplus income of £20 or greater, the full amount of this surplus will be sought under an IPA, see paragraph 31.7.27. Where the IPA was agreed before 1 December 2010 and is reviewed after this date, see paragraph 31.7.162 for details of how to apply the percentage scale of the amount to be collected, in the same way as when the IPA was originally calculated.
Whilst Parts 2 - 4 of this chapter and the income payments calculator(s) available on the Technical Section (Income Payments Calculators and Household Expenditure) Intranet page may provide assistance in ascertaining an appropriate contribution under an IPA/IPO, it is essential that each bankrupt's case is considered on its own merits, taking in to account all available information with regard to the individual's income and expenditure. Where it is considered that a higher or lower calculation than that recommended by the calculator is warranted the examiner should note the reasons for their recommendation in the file.
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 domestic expenditure considered. The official receiver must undertake an objective assessment of the information supplied by the bankrupt relating to income and expenditure, must not attempt to prejudge what the court might regard as being reasonable in the particular circumstances of the case and must act fairly in putting the relevant facts before the court where the matter cannot be resolved. The court has stressed the importance of assessing reasonable domestic need by reference to the circumstances of each individual case, see paragraphs 31.7.18 for details of significant court cases concerning private school fees (Re Rayatt  B.P.I.R. 495 and Scott v Davis  B.P.I R. 1009), and paragraph 31.7.86 concerning mortgage contributions and seeking alternative accommodation (Malcolm v Official Receiver  B.P.I.R 97.
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.
31.7.131Official receiver’s requirement to present the bankrupt with the IPA (at interview or by letter)
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 signed and 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. See also paragraphs 31.7.133 to 31.7.137 for further information regarding the time in which to request the return of the signed IPA.
If the bankrupt decides not to consent to the IPA, he/she 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.
The official receiver as a matter of operational policy should give the bankrupt a 14-day "cooling off" period to reflect upon the agreement he/she has made before it comes into effect. This is operational policy, not a legal or statutory requirement, to ensure consistency and best practice by following the precedent of 14 days “cooling off” which is legally required in consumer credit agreements. The proximity of the date of discharge must be considered, as an IPA only comes into force when it has been signed by both the bankrupt and the official receiver or trustee prior to the date of discharge, see paragraph 31.7.9. The official receiver should not delay in signing an IPA where discharge may occur before the 14-day period has expired see paragraph 31.7.137.
Following the best practice as described at paragraph 31.7.133 means that as a matter of normal practice, where the bankrupt signs the agreement at a face-to-face interview, and where the expiration of the 14 days occurs before the date of discharge, the official receiver should take no further action to sign the IPA 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, allowing the 14-day period described at paragraph 31.7.133 will mean that the period of time allowed 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 the bankrupt gave consent by signing the agreement. 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 agreement.
Rule 6.193A(1) [note 2] provides that an IPA can only be entered into by the bankrupt before his or her discharge from bankruptcy. This means the IPA is valid only where it is signed by the bankrupt and the official receiver or trustee prior to discharge (see paragraph 31.7.9) [Note 3] [Note 4] [Note 5].
Where the bankrupt has returned his/her signed agreement before discharge, but the date of discharge will occur before the expiry of the 14 days “cooling off” period (as described in paragraphs 31.7.133 to 31.7.135), the official receiver should sign the agreement immediately it is received, and dispense with the 14 day “cooling off” period, which is a matter of best practice and not a legal requirement. This ensures the official receiver is acting in the best interests of the creditors by ensuring the IPA asset available to the estate is not lost.
31.7.138 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.
31.7.139Copy of agreement to be sent to bankrupt following implementation
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 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:
(amended February 2012)
When a third party is making payments under an IPA (see paragraph 31.7.140), the third party may deduct the appropriate fee (from the payment) towards the clerical and administrative costs of complying with the IPA but must notify the bankrupt in writing of the amount deducted [note 8].
31.7.142 Attachment of earnings order in force prior to IPA
Where there is an attachment of earnings order in force against the bankrupt, this is an order of the court and payments should continue until the order is discharged or varied. 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 under the IPA [note 9]. When making an application, the court’s attention may be drawn to the provisions of the IA86 at section 285(3) (limit on creditors’ actions) and section 346 (enforcement procedures), and the official receiver should seek the refund of any monies paid to the creditor since the making of the bankruptcy order.
31.7.143Notice to judgment creditor holding attachment of earnings order
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. The IA86 also provides that an application may be made to dismiss or vary an attachment of earnings order that is in force to secure payments from the bankrupt [note 10]. See also Chapter 9, in particular paragraph 9.125.
(amended June 2014)
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 the official receiver should immediately instruct, the collection agent employed by the service., currently Clarke Willmott This is usually done by uploading a corporate report (Clarke Willmott IPA/O referral) in a spreadsheet format, along with a scanned copy of the IPA (or IPO where appropriate). Within two working days Clarke Willmott will set up on their Debt View website a separate record for each IPA/O, which should be checked by the case officer assigned to the case. This is an online enquiry facility for Insolvency Service staff which allows originating offices and LTADTs complete case access to be able to monitor progress, view payments received, all letters and case history, and receive and send instructions via their website at https://debtview.clarkewillmott.com/cwb2c/Application/welcome/welcome3.htmx. The case officer assigned to the case has a login account and password to allow access.
For full instructions on the procedure to follow and information required by the collection agent in order to process the collection of IPA or IPO contributions, please go to the Case Help Manual part Income Payments Agreements, paragraph 13 ‘How are Instructions sent to Clarke Willmott’ and paragraph 14 ‘Who do I contact at Clarke Willmott?’
Information on the service provided by Clarke Willmott and full guidance on using their Debt View website is available on the Clarke Willmott intranet page.
(amended June 2014)
Following the instruction of the collection agent as detailed at paragraph 31.7.144, the case must then be passed to the appropriate LTADT to monitor collection. A case should not be transferred to the LTADT until the first payment has been made. When cases are transferred to the LTADT in ISCIS they will be picked up by the LTADT Central Operations Team (COT) in Birmingham. The COT team will allocate each case to a LTADT case clerk and notify Clarke Willmott of the changes. The LTADT can access the case history and monitor payments etc. via the Debt View website https://debtview.clarkewillmott.com/cwb2c/Application/welcome/welcome3.htmx
See also the Case Help Manual part Income Payments Agreements paragraph 12 ‘Can the case go to LTADT?’.
Where there are other assets and an insolvency practitioner trustee is likely to be appointed, the official receiver should still take action to secure the payments under the IPA, pending the appointment of the insolvency practitioner. This includes instructing the collection agent where necessary to ensure payments commence on the due date as agreed.
(amended June 2014)
Should any payments be made by the bankrupt prior to instructing the collection agent, these must be entered on to the ‘payments’ screen of the case on Debt View, so that they can be taken in to account regarding the completion of the bankrupt’s obligations under the IPA.
(amended June 2014)
Any payment resulting from an NT coding being applied to the bankrupt's income will be identified on the corporate report referral spreadsheet paragraph 31.7.144 so that collection can commence as soon as the NT coding is applied by HMRC.
(amended June 2014)
Should Clarke Willmott be informed by the bankrupt that he/she is in receipt of a bonus payment from his/her employer, they will notify the relevant LTADT/official receiver via the workbook ‘task list’ on Debt View. It will then be the responsibility of the LTADT/official receiver to take the matter forward regarding any action to vary the agreement to collect the bonus payment if it is appropriate to do so. The collection agent will also inform the bankrupt that the relevant LTADT/official receiver's office will contact them regarding any action arising from this change in circumstance.