December 2006

An IPO can only be varied, reviewed or discharged by order of the court. Rule 6.193 of the Insolvency Rules 1986 [note 1] permits the trustee or the bankrupt to apply to the court to have the terms of the order varied or discharged. The official receiver when acting as trustee will not generally require the bankrupt to make application to court to suspend or cancel an obligation to make payments under the IPO.

The circumstances in which the requirement to apply to court for the IPO to be varied are often where the individual subject to the IPO has defaulted in making payments without due cause (see paragraph 31.7.74).

Another circumstance which may require the official receiver/trustee to make an application to court to vary the IPO would be where the bankrupt who is subject to an IPO is in receipt of a payment such as a pension lump sum (either before or after discharge) which can be held to be within the definition of income and can be recovered under an IPA/IPO (see also paragraph 31.7.11). The bankrupt's monthly income may change as a result of receiving his/her pension (as opposed to remaining in employment) and the official receiver/trustee should consider this when seeking to vary the amount to be claimed under the IPO. To ensure that creditors receive the full anticipated amount under the original order it may be necessary to adjust the bankrupt's payments , which could include making a one off payment from the lump sum to cover the amount still outstanding within the term of the original IPO and then vary to nil the amount of contribution for the months remaining within the original term of the IPO (any variation of the payment terms under the IPO must remain within the period of three years from the date the IPO commenced) .

To apply for the terms of the order to be varied or for the order to be discharged, a statement is required to be filedsetting out the grounds of the application. Where the official receiver as trustee makes the application he/she is required to make a formal application to the court (form IPORAV). The court may, if it considers "no sufficient cause is shown for the application", dismiss the application, but must give the applicant an opportunity to attend for the hearing and for which the applicant must receive at least seven days notice.

Where the application is not dismissed, at least 28 days before the hearing the applicant must send notice of the venue, with a copy of the application and a statement of grounds to the bankrupt or trustee (whichever of them is not the applicant). Not less than seven days before the hearing the trustee may file a report at court setting out any matters to be drawn to the court's attention. A copy of any such report must be sent to the bankrupt. If, as a result of the hearing the income payments order is varied, the official receiver, as trustee, should send sealed copies of the order to the bankrupt and the payor, if other than the bankrupt. Where collection agents have been instructed, a copy of the order should be forwarded to them so that they can act on the terms of the new order or close their file.

Where an insolvency practitioner has been appointed trustee, and variation of an IPO is required due to the bankrupt's default in making payments or similar, the official receiver should decline to deal with the application to the court for variation of the order if requested by the insolvency practitioner trustee, as such applications form part of the trustee functions.

[Back to Part 10 - IPOs Operation of the order and default in payment]