Urgent news on IPA's - Changes for BRs after 01/12/2010

debtinfo

wolfers wrote: »

That strikes me as an incredibly stupid change. I think it may well deter people from going bankrupt altogether because in effect you will be living in virtual poverty

As stated above you should not be in virtual poverty as the rule still stands that an IPA/O cannot be given such that the bankrupts reasonable domestic needs are not met

immoral_angeluk

I think the important thing is that people intending on going BR have taken proper advice and make sure that their income/expenditure is correctly accounted for and that the implications of an IPA are explained... How can this happen if they change the rules at a moments notice.

JCS1

immoral_angeluk wrote: »

I think the important thing is that people intending on going BR have taken proper advice and make sure that their income/expenditure is correctly accounted for and that the implications of an IPA are explained... How can this happen if they change the rules at a moments notice.

That's the big issue. People have taken advice and completed the SOA under the current rules, but when it gets to interview will be hit with the new rules (I also wonder if the expenditure guidelines will be looked at more closely).

wolfers

When I said "virtual poverty" -- a poor choice of words on my part -- I meant that the budget you agree with your OR is pretty tight. And if your income exceeds that budget by only £20 you'll be locked into a variable IPA for three years. That IPA will swallow up every pay rise and every bonus for three years. Thinking about going for that promotion at work? Well, don't bother. You won't see a penny of the pay rise that goes with it.

Yes, I know, if you hadn't frittered away all that money on big screen TVs you wouldn't be bankrupt in the first place and it's only fair that you pay back the banks you borrowed the money from. But this ignores the philosophy of bankruptcy and the fact that the banks build in your bankruptcy into their risk models -- that's why they borrow money at 0.5% and lend it at 15.9%.

I wonder if anyone will challenge this. After all, IPAs are voluntary agreements and -- for people who are currently undischarged bankrupts -- this is changing the rules midway through the game. Will the IS really want to go to court to get an IPO if you refuse a marginal IPA?

JCS1

wolfers wrote: »

When I said "virtual poverty" -- a poor choice of words on my part -- I meant that the budget you agree with your OR is pretty tight. And if your income exceeds that budget by only £20 you'll be locked into a variable IPA for three years. That IPA will swallow up every pay rise and every bonus for three years. Thinking about going for that promotion at work? Well, don't bother. You won't see a penny of the pay rise that goes with it.

Yes, I know, if you hadn't frittered away all that money on big screen TVs you wouldn't be bankrupt in the first place and it's only fair that you pay back the banks you borrowed the money from. But this ignores the philosophy of bankruptcy and the fact that the banks build in your bankruptcy into their risk models -- that's why they borrow money at 0.5% and lend it at 15.9%.

I wonder if anyone will challenge this. After all, IPAs are voluntary agreements and -- for people who are currently undischarged bankrupts -- this is changing the rules midway through the game. Will the IS really want to go to court to get an IPO if you refuse a marginal IPA?

But once one OR's office has gone to court an got an IPO for a marginal IPA, then the precedent has been set in court for others to follow.

It's also doubtful that any banks would get money from these IPA's, OR fees get paid first.

alastairq

I wonder if anyone will challenge this. After all, IPAs are voluntary agreements and -- for people who are currently undischarged bankrupts -- this is changing the rules midway through the game. Will the IS really want to go to court to get an IPO if you refuse a marginal IPA?

You make a good point there.....the Court system as it stands is overloaded....if a lot more people challenge an IPA..then the backlog at the Courts will likely be phenomenal.


Imposition of such drastic rules will also result in an ever more burgeoning black economy.....there is even less incentive to be 'honest' with one's OR office...which in itself may create even more workload....and of course, a marked reluctance on the part of IS staff to pursue what may be suspicions of the above...?


Do I detect a smidgen of influence from our erstwhile credit industry here??

A bit of old-boy lobbying going on???

debtinfo

I understand what you are saying wolfers but looking from the outside.

you say you'll be locked into a variable IPA for three years - i think this is point really, The IS needs the money and this is one way in which they can raise it.

also this is changing the rules midway through the game - unfortunatly someone will always be midway through when the rules are changed, granted they probably should have given more notice.

Will the IS really want to go to court to get an IPO if you refuse a marginal IPA? - Well this remains to be seen, its a risk for both sides if it goes to court

wolfers

Fair enough -- we're all in this together and the IS needs to pay its own way -- but this change is so sudden and so draconian. The threshold has been cut by 80% and the surplus available to the debtor (beyond £20) has been cut by 100%. This is such backward thinking. It's like the current benefits system -- it forces people to lie and to cheat and that's not good for anyone.

JCS1

alastairq wrote: »

Do I detect a smidgen of influence from our erstwhile credit industry here??

A bit of old-boy lobbying going on???

I doubt it is lobbying. The Insolvency Service as a government agency has always been set the goal of being self funding. They've been hit by government cuts like the others, all agency staff have gone to cut costs, and I suspect the IPA news is a way of getting more funds in.

OR's fees start at £1,715 (probably gone up slightly as my figures are a few years out of date), and they get paid first from an assets including IPA's.

debtinfo

alastairq wrote: »

Do I detect a smidgen of influence from our erstwhile credit industry here??

A bit of old-boy lobbying going on???

I think not, None of the money from these changes will go to the creditors, it will go to the IS to pay their costs, Bear in mind that the Fees rules also changed, the main bit you saw from this was the £450-£600 change but what is less noticable is the SOS fee on assets which means more of the smaller realisations go to the IS rather than to the creditors (something im sure they are not happy about)

If you look at the IS figures which has to be self funding, it is obvious that firstly with the housing crash there are more negative equity properties so a big loss of revenue there. Secondly they introduced DRO's great news for debtors but causing a Huge drop in bankruptcies which turned into DRO's instead and they only get £90 for them rather than £450.

Finally they recently cut all of the agency staff. So i think it just comes down to them doing what they can within the existing laws to make their books balance