# Bankruptcy and the IPO. How exactly does it work?



## Outsider (30 Mar 2016)

I would be very grateful if someone could help me on any of the following issues.

I have been doing a bit of googling but I have been unable to find any detailed information.

1. Who are the parties that thrash out the agreement? Are the creditors involved in the process or can they in anyway veto the agreement?

2. How exactly is the amount to be paid every month arrived at? Is it based on earnings from the past month? Past year? 

3. What happens in the case of someone who decides to limit their earnings to the Reasonable Living Expenses? Is this "allowed"?

4.What happens in the case of someone whose earnings fall resulting in an inability to pay the agreed amount?


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## Stuboy (30 Mar 2016)

Points 1 and 2:

IPA/IPO are both based off the RLE. Your essential outgoings are also taken into account i.e. rent/childcare and any other exceptional expenses (i.e. medical) and added to the RLE. There is no negotiation outside the RLE, essential outgoings and exceptional expenses. No other parties beyond the OA and the bankrupt are involved in deciding this, it's pretty black and white. you fill in a simple form and supply proof of earnings, a formula is applied on excel and you either have a surplus you pay or you don't.

A payment agreement (IPA) is quickly set up on a voluntary basis between you and the OA representative, it can be very quickly amended/cancelled by e-mail if your income drops or raises etc.
An IPO is a court appointed Payment Order, generally implemented when the bankrupt does not agree to co-operate with the OA rep in arranging the IPA, it is very hard to get it amended (up or down) as that must be done through a court (at least that is my understanding). therefore, if you have an IPO and your income is cut your payment will not go down until you can petition the court to reduce it. Now I'm not sure how long it would take to get in front of a judge to get this sorted but I wouldn't say it would be quick.

Point 3:

If your earnings are limited to the RLE plus your essential living expenses and no payment agreement is implemented; good for you. is it illegal. No. they cannot make you take a job to earn more money. or make your employer pay you more if your wages or hours are cut making you go below the RLE. 

Point 4.

see above...IPA easily amended, IPO not so much.

Hope that helps. Stuboy


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## Outsider (30 Mar 2016)

Thanks Stuboy for such a comprehensive answer. I really appreciate you taking the time.

What view would be taken do you know of someone who voluntarily takes a reduction in hours in order to bring themselves below the RLE's in order to avoid a payment order?
Or somebody who takes a one year break from work to coincide with the bankruptcy for the same purpose?

I can't help feeling that these strategies would be viewed as an abuse of the process...


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## Stuboy (31 Mar 2016)

Firstly...I'm not a PIP or financial professional, but I am a bankrupt. In my readings about the process (particularly in respect of irish people that travelled to the UK pre our 1 yr bankruptcy - think Ivan Yates as one example) the entire thing is a practice in dodging the payment order. When i became bankrupt I had a payment agreement applied, then my wife changed jobs to a lower paid position due to lower hours at the work location, this wasn't intentional but the OA didn't know that. my point is that the OA didn't query it. when I sent the e-mail to communicate the change in employment, it was accepted and the payment order was discontinued, it's just a numbers game. If your working hours drop, they drop. the OA can't control the personal or work decisions that you make in life, if that was the case, and the OA was committed to maximising the amount that could be garnered from a payment order, the OA would insist on those working in hourly paid positions on taking any overtime that was available. it's bonkers.
If you decide to reduce your hours to have more personal time and your income suffers as a result...that's your decision.
That is my reading of the situation anyway. but, as I said, I'm not a PIP or financial professional and you should take advice from a professional on deciding to go bankrupt and all that is involved in the process.


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## Outsider (1 Apr 2016)

Thanks again Stuboy.
I had seen in other threads suggestions that if there was no income above the RLE's that you could avoid a payment order completely and that would be the end of it. i.e. once out of bankruptcy you would no longer be pursued for any of your earnings.

Your post above would seem to contradict this idea.


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## Stuboy (2 Apr 2016)

Outsider said:


> Thanks again Stuboy.
> I had seen in other threads suggestions that if there was no income above the RLE's that you could avoid a payment order completely and that would be the end of it. i.e. once out of bankruptcy you would no longer be pursued for any of your earnings.
> 
> Your post above would seem to contradict this idea.


Maybe I explained it bad...but if your income is under the rLe plus expenses there's no payment order applied.


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## NearlyThere (4 Apr 2016)

Hi All,

I went through a similar situation as StuBoy in December where I had to reduce my hours due to medical reasons - and I got hounded by the ISI.

Doctor's certs, revised payslips, letters from HR, bank statements all requested and grilled.

All in all I've had a terrible experience with the ISI, very little understanding, leeway or explanation given to any queries.

And in fact I've found that when you question their stance it only makes them come down on you harder.

Definitely not an organisation working for creditors or even trying to operate from the middle ground.

NT


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## Outsider (4 Apr 2016)

NT...can you elaborate on "grilled"? Your experience seems at total variance with Stuboys.

Did the OA not believe you?


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## NearlyThere (5 Apr 2016)

Hi Outsider,

By grilled I mean my company were contacted, my payslips were queried and bank statements went through with a fine tooth comb.  Never mind the fact that no consideration was made for the fact I was reducing hours for medical reasons.  

I think the reason being that I was making a substantial contribution to my creditors prior to that point and then it reduced to 0 once this change took effect.

NT


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## so-crates (5 Apr 2016)

I am no expert in the area and I have no personal experience to share, but from following various threads and posters on here, it isn't unusual to see someone reducing income prior to bankruptcy. That way you approach the situation already living on a minimum amount thus minimising any debt repayments during bankruptcy and minimising the risk of an post-bankruptcy order to continue paying.


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## NearlyThere (6 Apr 2016)

That is definitely the way to go so-crates.....our experience is that if you have surplus income you are a cash cow for the ISI and they will look to milk you as much as they can

NT


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## Stuboy (8 Apr 2016)

yes, you don't want to go into the insolvency process with a big income, my payment agreement amount was very small anyway, and my wife's income reduced as her contract was up and she got a new job.


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## so-crates (8 Apr 2016)

NearlyThere said:


> That is definitely the way to go so-crates.....our experience is that if you have surplus income you are a cash cow for the ISI and they will look to milk you as much as they can
> 
> NT



While I won't quibble on the point that from a personal perspective it definitely makes sense to minimise your income prior to bankruptcy, I think to characterise it as the ISI viewing you as a cash cow is not fair. In every bankruptcy there is a creditor losing out. They rarely get much sympathy (and given some of the behaviours that have been engaged in - that isn't surprising) but they did have a right to repayment that the bankruptcy has effectively done away with. The ISI is obliged to do what it can to provide some repayment to that creditor as well as being obliged to protect the bankrupt. If you have an income over and above the Reasonable Living Expenses it is clearly stated that income is available for the ISI to distribute to your creditors. Also to "blame" the ISI is unreasonable. Fundamentally they are an intermediary, they do not benefit from "treating you as a cash cow" or "milking" you. The purpose of that money is to pay off your former creditors.


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## Outsider (10 Apr 2016)

so-crates said:


> If you have an income over and above the Reasonable Living Expenses it is clearly stated that income is available for the ISI to distribute to your creditors.


Socrates,
What, can you tell me, happens in the case of someone who has insufficient income for an IPO but who let's say 18 months later is earning in excess of the RLE's? 
In other words, can an IPO be applied at any time during the three-year period?


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## NearlyThere (11 Apr 2016)

If you don't see the ISI as a cash-cow So-crates, then why are you hiding or reducing your income?

If you feel so strongly about the debt owed to creditors, perhaps you should like I did pay €700/€800 a month to those creditors rather than playing the game?


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## Stuboy (11 Apr 2016)

Outsider said:


> Socrates,
> What, can you tell me, happens in the case of someone who has insufficient income for an IPO but who let's say 18 months later is earning in excess of the RLE's?
> In other words, can an IPO be applied at any time during the three-year period?


It's a one year period now...and yes, if your income goes up over the RLE's at any stage in the bankruptcy period, then a payment arrangement will be put in place. it is your obligation to inform the OA office should your income change.


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## Outsider (11 Apr 2016)

Stuboy said:


> It's a one year period now...and yes, if your income goes up over the RLE's at any stage in the bankruptcy period, then a payment arrangement will be put in place. it is your obligation to inform the OA office should your income change.



Hi Stuboy.
Just so I have this straight (and sorry to wreck your head)

1. I'm declared bankrupt.
2. I ensure I'm earning below the RLE's at all times so no IPO is put in place.
3. After a year I exit bankruptcy.
4. Creditors/OA *cannot* make a claim on income from this point onwards. 
5. The day after exiting bankruptcy I return to earning €200k/annum.
6. I get to keep it all. No questions asked.

Is this absolutely the case?


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## Stuboy (11 Apr 2016)

I am pretty sure that it is, once you have been discharged from bankruptcy the OA has no claim on you thereafter.
look at it this way...Yates ditched his media job and went to the UK to go bankrupt, within a week or two of being discharged was back on the air in ireland earning again with no payment agreement. a more blatant dodging of the payment agreement has never been done considering that everyone knew he would be back in his media job after discharge. but the creditors can do nothing. these are the rules.

However, I would say one thing; from personal experience, bankruptcy is no walk in the park. We're living week to week, and to say 'money is tight' is an understatement. however, there is the benefit of knowing that you will come out clean on the other side and can start again. 
Good luck.


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## Outsider (11 Apr 2016)

Stuboy said:


> Yates ditched his media job and went to the UK to go bankrupt, within a week or two of being discharged was back on the air in ireland earning again with no payment agreement. a more blatant dodging of the payment agreement has never been done considering that everyone knew he would be back in his media job after discharge.



Stuboy. Ivan did not get off that lightly. Because of his ministerial pension he was well over the RLE's and so was unable to dodge the payment order.

_"The order allows the trustee nominated by AIB to take charge of Ivan Yates’ finances during the formal bankruptcy to keep dipping his hand fairly deep into Mr Yates’ pocket for the next two years.
It is not a standardised thing, but the dark mood from AIB and Mr Yates’ now considerable post-bankruptcy income suggests it is likely.
The rules are fairly clear, for up to two years after a bankruptcy the bank – acting through a trustee – can recoup any income in excess of what’s considered necessary for a minimum standard of living.
In Ivan Yates’ case that will amount to a hefty figure. He has his old job back as a presenter with Newstalk and has just been hired as a columnist with this newspaper." _
*http://www.independent.ie/business/...l-and-become-an-economic-zombie-29589664.html*

I know that Steve Thatcher has repeatedly said that the "no retrospective IPO" rule holds for the UK but I have as yet found no definitive evidence that similar applies in Ireland.


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## so-crates (12 Apr 2016)

NearlyThere said:


> If you don't see the ISI as a cash-cow So-crates, then why are you hiding or reducing your income?
> 
> If you feel so strongly about the debt owed to creditors, perhaps you should like I did pay €700/€800 a month to those creditors rather than playing the game?



Just to clarify, I am not going through bankruptcy nor am I likely to do so (fingers crossed etc). Furthermore, given I am paying off my mortgage, I am paying that amount to my creditors and not playing any games. 

My point is that to say that the ISI views you as a cash cow is not correct. The ISI is empowered to manage your bankruptcy and a part of that is paying off your creditors from any surplus you may have.


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## TLO (12 Apr 2016)

The reason that we don't have definitive evidence for Ireland is that the new rules (reducing the bankruptcy term to 1 year and the payment order to 3 years) are new.  The new rules came into effect on 29 January 2016 which is less than 3 months ago.

We won't have practical examples of the impositon/non-imposition of payment orders until the first bankrupts have completed their one year term and come out the other side discharged. So the earliest it will be possible to say what happens in practice will be around January/February 2017.

Having said that, there doesn't seem to be a mechanism whereby a payment agreement/order can be imposed on a former bankrupt if their income rises above RLEs after discharge.  The closest examples currently come from England and Wales whereby an Income Payment Agreement/Income Payment Order has to be put in place during the 1 year bankruptcy term.  If an IPA/IPO is not put in place during the 1 year bankruptcy term then there is no clawback on future income, and the former bankrupt can earn as much as possible without fear of it being claimed by the Official Receiver or a bankruptcy trustee.


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## Stuboy (13 Apr 2016)

Outsider said:


> Stuboy. Ivan did not get off that lightly. Because of his ministerial pension he was well over the RLE's and so was unable to dodge the payment order.
> 
> _"The order allows the trustee nominated by AIB to take charge of Ivan Yates’ finances during the formal bankruptcy to keep dipping his hand fairly deep into Mr Yates’ pocket for the next two years.
> It is not a standardised thing, but the dark mood from AIB and Mr Yates’ now considerable post-bankruptcy income suggests it is likely.
> ...


Interesting... thanks for that.


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