Current Practice And Future Legislation

debt_doctor

Hi all,

Just thought I would post this internal e-mail form one of my trusty colleagues who went to a forum abour current practice and future legislation. Any thoughts / comments ???

DD


Dear all,

Following a very interesting Discussion Forum meeting in XXXXXX yesterday, I thought I’d circulate my very sketchy notes on what was discussed. There were two guest speakers; XXXX XXXXX Official Receiver for XXXXXXXXX , and XXXXXX XXXXX from the policy division of the Insolvency Service.

Most of what was said is vaguely common knowledge, but though if it was all in one place in an email it might be useful- also means I can bin my scraggy notes.

General updates included that there is the new Mental Health Evidence Form which creditors will soon expect if requesting write offs or preferential treatment for clients with mental health vulnerabilities and that it was available on the MAT website now.

The OR gave a very interesting chat about various issues he considered ‘hot or not’ in insolvency:
64000 bankruptcies last year nation wide.
2400 in XXXXXXXX- 67 companies
85 BROs of 3-14 years, mostly in the 6-7 range
350 IPA £50-£470pm

He advised that OR have pay related targets for BROs and IPAs and as his department were ‘down’ he would be auditing to attempt to increase number of BROs. there was some discussion of this as best practice as you may imagine. He advised that Many BROs may be relating to the amount included in the bankruptcy, but that 20-30k didn’t really bother him.

Northern Rock are pressing for Self Certificate Mortgages to be considered as Fraud if the income doesn’t match up and not be included in bankruptcy. This could have implications for those clients advised to hike a self certificate estimate by Estimate by estate agents during recent years.

He then gave ‘personal opinion’ and hints at his ‘rules of thumb’ which I found interesting::rolleyes:

• He gave heavy BRO to client for borrowing £1000 from a Credit Union after lying on application as to what loan was for and used the money to go bankrupt. He advised that because they were a CU and because the client lied he felt it was abusive of a good cause and it really p*ssed him off. I could see the reasoning and wondered if it may spread across to SF loans? Locally I’ve had several clients not get a BRO for this, but it has happened nationally. <LI class=MsoNormal style="mso-list: l3 level1 lfo1">He investigates ‘appropriateness’ of mortgage levels if client claims mortgage of over £900pcm. He says if he feels the client is taking the p*ss in trying to stay in an expensive house while clearing unsecured debts and is avoiding IPA by having high mortgage levels, he will set and IPA, even if the I&E shows little or no surplus as he feels clients should not attempt to sustain and unrealistic or expensive lifestyle (even if they can afford it without Unsecured debts) at the expense of unsecured creditors. He said over £900pcm he looked on a case by case basis.
• He believes Discretionary Publication of personal bankruptcies will come in soon, but is unsure of the legalities of not informing creds.

At lunch I spoke to Northern Rock Mortgage Manager and he advised (as we know) that Northern Rock will not accept negotiation on reduced instalments on their unsecured personal loans of £20-30k they give out as part of mortgages (or as deposit in most cases) and are only interested in securing the debt. He did say that once there is charge on the property they are ‘happy to freeze interest’ and ‘happy to accept as little as £1’. I asked if that meant they would waive statutory interest on the charging order, he said they weren’t that bothered about it and would only pursue if the house sold with enough to spare to cover it- not a firm policy decision or printed thing to be relied on, but interesting. I also asked if they would accept a voluntary charge on properties and he said they would. This lead me to consider if we get those clients with a northern rock mortgage and the big unsecured loan who wish to keep the property, if it may be cheaper to offer the voluntary charge on terms of no interest in some cases?

XXXX XXXXX then gave a presentation on the new debt relief measures coming in in the next few years and where they are up to:

Admin Orders:

• Expected 2010-2011 in new form.At least £50 per month disposable income <£15000 debts.Limited to 5 years maximum repayment
• Administered through Courts Service as now

Enforcement Restriction Orders:

Expected 2010-2011.Client must have had financial downturn

• Lost job
• illness etc

Client must expect financial upturn within a maximum of 12 months

• Realistic prospect of getting new job
• Recover from illness etc

Will place an enforced Moratorium on enforcement of debts for max 12 month period. Sounds like a poor-mans Time Order but could be very useful.

• Administered through Courts Service

Statutory ‘Debt Management Scheme’ :

• Expected 2009 (apparently) but…No clear picture of what it will look like Is likely to Bind Creditors but…May not write off debts so May not have time limits….so…. Could go on forever…….
• Administered by possibly Courts Service, or not…..

Debt Relief Orders:

• APRIL 2009. Administered by Insolvency Service. Unsecured non-excluded debts under £15,000 (excluded is Mag court fines, student loans, same as bankruptcy) Assets of less than £300, excluding tools of trade, household goods, vehicles under £1000 excluded even if not ‘required’, also must be Net value (what it would fetch in paper etc). Houses in Negative Equity DO count as asset, so non-homeowner only. If beneficial interest declared by court then is asset, otherwise case-by-case basis on common sense.
• Surplus Income of less than £50per month ( as those with more will go into Admin Order we presume) Cannot have had BRO in last 6 years, be an undischarged bankrupt, Under a BRO, under a DRRO(see later on) or under a current IVA. Must be Domiciled in England and Wales for 3 years. Application via Intermediaries only.Intermediaries will be chosen by Competent Authority- allocated by Secretary of State
• COs likely to be Cit A, National Debt Line, CCCS, MAT, IMA etc No Money to go to COs or direct providers, no fee can be charged for submitting DRO. Cit A would not be able to delegate power to nominate intermediaries to individual Bureaux. Intermediaries must be named and numbers
  • Intermediaries could be one person in office, or several.
  Online Application- can be filled out by client, can only be sent by intermediary. Application is clients, not intermediaries and intermediary is NOT liable, this is clear in base legislation. Turn around expected within 24 hours- backlog allowing at first. All will be processes in Plymouth. Will cost client £90-£100 estimated at the moment, payment upfront by Paylink/Paypoint card allowing partial instalment payment within limits, or direct to OR by charities/ third parties (not intermediaries).
• IS will provide some money to Money Advice Trust (maybe £10 per application) to be ‘fed-back’ into Money Advice via training opportunities or as they see fit. The applications are decided by OR, not Courts at any point. Both creditor and Client have right to objection and appeal .
• No automatic investigation unless creditors raise objection with proof of grounds on basis that clients application incorrect. Intermediaries expected to see payslips and bills but take clients word on other aspects.
• OR will credit check applicants which is likely to show up houses, cars and debts over £15000. If client forgets creditor they cannot be added later and will remain payable. If the debt takes the amount significantly over £15000 order will be revoked.If client deliberately omits creditor order will be revoked.OR can choose not to make Order if client does not fit guidelines or lies on application
• Application submitted, Order Made and placed on Electronic Individual Insolvency Register EIIR (public one on website as per)
• Order places moratorium on enforcement for 12 months unless Order is lifted if client lied, client did not cooperate with OR, client found not to fit guidelines etc, this places client back in initial position with no enforcement moratorium.Order can also be lifted if client has windfall or circumstances change (usual duties to inform). This will not be immediate, but will have period of 1-3 months to arrange payment with creditors, this may mean the enforcement moratorium lasts 15 months if windfall in month 12. This is to prevent a single creditor being able to swoop on a windfall to the exclusion of others.Restrictions on debtor the same as Bankruptcy- no credit over £500 without informing creditor, cannot be director without leave of court, cannot be IP, cannot trade in name other than own as sole trader etc.All included debts discharge at end of moratorium
• Assets Do Not Vest in OR
• OR can prosecute if client lies, as with bankruptcies. Can end up with DRRO as with BRO.
• Will affect Credit Reference as with all EIIR listed Insolvency Remedies.

I hope that was of use.

Training will be provided by IS closer to time when intermediary system ironed out and intermediaries chosen. Those in advice but not and intermediary can also attend as many may be filling out applications then getting them submitted by nominated intermediary.


Clear as mud J

DD

dalip

Well i for one found that interesting,but all that nsm=level 1 got a bit confusing;) . Thanks DD

GettingHopeful

Not sure I understand it all, but Pay Related Targets for BRos and IPAs are scarey, also BROs relating to the amount involved.

Thanks for posting.

debt_doctor

:eek: :eek:

Sorry all !!! - ive edited so you can read it now !:D

DD

blind-as-a-bat_2

debt_doctor wrote: »

He advised that OR have pay related targets for BROs and IPAs and as his department were ‘down’ he would be auditing to attempt to increase number of BROs..

]

Thanks for that DD, the further cofirmatoin on the above says it all, the IS will never asses any case of BR on its merits, it will always be on how close they are to meeting targets, and the carreer aspirations of the examinour of the BR at the time

With that in mind the BR system will never be consistant for every case

Says it all really:rolleyes:

As for NR and self cert motgages, serves them right in my view, what did they expect? that everyone would tell the truth? may explain why they went bust then

dalip

If i have read that right there are some pretty unrealistic rules coming into force:eek: .

fermi

Thanks DD.

A lot to think about there. :rolleyes:

dalip

blind-as-a-bat wrote: »

Thanks for that DD, the further cofirmatoin on the above says it all, the IS will never asses any case of BR on its merits, it will always be on how close they are to meeting targets, and the carreer aspirations of the examinour of the BR at the time

With that in mind the BR system will never be consistant for every case

Says it all really:rolleyes:

As for NR and self cert motgages, serves them right in my view, what did they expect? that everyone would tell the truth? may explain why they went bust then

Think i encountered one of those recently;)

blind-as-a-bat_2

I know my militant attitude to this may be odvious, but if the IS is working on a target driven system, how does that make them any differant to a DCA that most of us went BR to avoid/get of our backs

Granted that may be a bit unfair as the Or doesnt ring you 10 times a day, but it will lead to the needs of the debtor being egnored just to reach a target so is the same from that angle in my view, and the proof has been seen on this board that it happens, and by the tone of that person, it will get worse, s/he may have been talking about BRO,s but i am sure the same train of thought will be applied to IPA,s etc

Dorothy56

I should make my OR very happy then - as I will most definately be a BRU candidate :j !

debt_doctor

I agree with Bat. I think pay related targets relating to BRUs and IPAs are a disgraceful practice, I only hope that they get challenged - but we all know that unless someone gets advice or reads a forum like this one then many unfair BRUs and IPAs will get through.

On a brighter note im glad to see that the cost of a debt relief order is to be under £ 100, and no court fee or court involvement. It is also good that cars under £ 1000 value are exempt and that you can pay the DRO costs by instalments.

DD