Trustees in Bankruptcy can apply for an Income Payments Order even when an Income Payments Agreement existed previously

The District Judge decided on 20 November 2013 that an Income Payments Order (IPO) could not be made against the Bankrupt as he had already entered into an Income Payments Agreement (IPA). That decision was overturned by the Honourable Mrs Justice Asplin on 12 May 2014.

The Trustees in Bankruptcy issued an application for an IPO against the Bankrupt. This was met with a cross application by the Bankrupt to strike out the Trustees’ application on the basis that the IPO and IPA regimes are mutually exclusive and run parallel to each other and when an IPA has been entered into an IPO can not be made because it would compel a Bankrupt to make payments beyond the 3 year limit envisaged in the Insolvency Act.

The Trustees in Bankruptcy appealed the District Judge’s decision. The Appeal Judge found that it was not Parliament’s intention to create mutually exclusive regimes and that section 310(6) of the Insolvency Act 1986 introduced a discretion to allow an IPO for a shorter time should it be necessary. Mrs Justice Asplin allowed the appeal on the basis that section 310 was clear in its ordinary meaning and that the legislation would have, if it was so intended, stated any intended limitations on the Court’s jurisdiction.

The effect of this appeal means that an IPO and IPA do not run as mutually exclusive regimes. Any overlap in an IPO where an IPA already exists and the length of IPO in question is left to the discretion of the Judge. Accordingly, an IPO can be entered into against a Bankrupt who has already entered into an IPA.

For advice on insolvency matters, please contact Stewart Wilkinson, Ashok Patel, Milan Kapadia or David Bowman.