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Obtaining an IPO after an IPA

In the case of Thomas and another (Joint Trustees in Bankruptcy of Stephen John Edmondson) v Edmondson [2014]  EWHC 1494 (CH) the High Court decided that it did have the discretion to make an Income Payments Order (IPO) where a bankrupt previously entered into an Income Payments Agreement (IPA).

Facts

On 21 August 2012, a Bankruptcy Order was made against the debtor (The Bankrupt).  On 7 December 2012 the Bankrupt entered into an IPA with the Official Receiver (OR) in which he agreed to pay the OR or any other person appointed as a trustee in bankruptcy an amount to reflect the additional income that he would receive as a result of his tax code being changed to NT. Those payments were to continue to be made until the end of the tax year, 5 April 2013.  However, it came to light that on 6 December 2012, joint Trustees in Bankruptcy were appointed.  In May of 2013 the joint trustees sought a further IPA with the Bankrupt which he refused and on 19 August  2013, they applied for an IPO.  The terms were for the Bankrupt to pay £10,000 per month for three years.  The trustees later amended their application to seek a variation to the IPA dated 7 December 2012 and leave for the application which was out of time. 

Decision

Mr Justice Applin found that the District Judge at first instance had erred in finding that the jurisdiction to grant an IPO under Section 310 of the Insolvency Act 1986 (the Act) was ousted where there had been an IPA.  He found that as a matter of statutory construction the court was not prevented from making an IPO where the Bankrupt had entered into a previous IPA under s.310A of the Act .  His Honour went on to say in his judgment that the existence and terms of a previous IPA were factors that a Judge would take into consideration in the making of any subsequent IPO.

Conclusion

The case demonstrates that it is open to a trustee to extend the period of time that a bankrupt must contribute income by obtaining an IPO after an initial IPA has been entered.  A review of the bankrupt’s income and expenditure prior to discharge is therefore important in determining whether such an application is appropriate under any given circumstances. 

Written: 19/05/2014

Disclaimer
The information and any commentary on the law contained in this article is provided free of charge for information purposes only. No responsibility for its accuracy and correctness, or for any consequences of relying on it, is assumed by any member or employee of Everys Solicitors. The information and commentary does not and is not intended to amount to legal advice and is not intended to be relied upon. You are strongly advised to obtain advice from a Solicitor about your specific case or matter and not to rely on the information or comments in this article. 

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