PIA Terms
Bankruptcy Act
Mandatory requirements concerning Personal Insolvency Arrangement.
99.— (1) Subject to the mandatory requirements referred to in subsection (2), the terms of a Personal Insolvency Arrangement shall be those which are agreed to by the debtor and subject to this Chapter, approved by a majority of the debtor’s creditors in accordance with this Chapter.
(2) The mandatory requirements referred to in subsection (1) are:
(a) a Personal Insolvency Arrangement shall clearly specify which debts are secured debts and which debts are unsecured debts;
(b) the maximum duration of a Personal Insolvency Arrangement shall be 72 months but a Personal Insolvency Arrangement may provide that this period may be extended for a further period of not more than 12 months in such circumstances as are specified in the terms of the Personal Insolvency Arrangement;
(c) where the debtor performs all of his or her obligations specified in a Personal Insolvency Arrangement, he or she shall not stand discharged from the secured debts covered by the Personal Insolvency Arrangement except to the extent provided for under the terms of the Personal Insolvency Arrangement;
(d) a Personal Insolvency Arrangement shall not require the debtor to sell any of his or her assets that are reasonably necessary for the debtor’s employment, business or vocation unless the debtor explicitly consents to such sale;
(e) a Personal Insolvency Arrangement shall not contain any terms which would require the debtor to make payments of such an amount that the debtor would not have sufficient income to maintain a reasonable standard of living for the debtor and his or her dependants;
(f) a Personal Insolvency Arrangement shall—
(i) make provision for the costs and outlays of the personal insolvency practitioner which relate to the matters referred to in sections 48 to 54 and this Chapter and to the ongoing administration of the Arrangement,
(ii) indicate the likely amount of the fees, costs and outlays to be incurred or where this is not practicable the basis on which those fees, costs and outlays will be calculated, and
(iii) specify the person or persons by whom those fees, costs and charges are payable and the manner in which they have been or are to be paid;
(g) a Personal Insolvency Arrangement shall make provision for the manner in which the debtor’s debts are to be treated in the event of the death or mental incapacity of the debtor;
(h) a Personal Insolvency Arrangement shall not require that the debtor dispose of his or her interest in the debtor’s principal private residence or to cease to occupy such residence unless the provisions of section 104 (3) apply;
(i) a Personal Insolvency Arrangement shall provide that the circumstances of the debtor be reviewed by the personal insolvency practitioner at regular intervals which are specified in the Personal Insolvency Arrangement (which intervals are not greater than 12 months) during the currency of the Personal Insolvency Arrangement;
(j) a Personal Insolvency Arrangement shall provide that the review referred to in paragraph (i) shall include the preparation by the debtor of a new Prescribed Financial Statement, a copy of which together with a statement by the personal insolvency practitioner as to whether he or she considers that statement to be complete and accurate, shall be sent by the personal insolvency practitioner to each creditor;
(k) subject to sections 102 to 105 , a Personal Insolvency Arrangement shall make provision for the manner in which security held by a secured creditor is to be treated; and
(l) the terms of a Personal Insolvency Arrangement shall specify the circumstances where the personal insolvency practitioner shall be obliged to propose a variation of the Personal Insolvency Arrangement in accordance with section 119 .
(3) The Insolvency Service may publish a Code of Practice providing guidance on any of the matters set out in subsection (2).
(4) For the purposes of subsection (2)(e), and without prejudice to subsection (3), in determining whether a debtor would have sufficient income to maintain a reasonable standard of living for the debtor and his or her dependants under the Personal Insolvency Arrangement, regard shall be had to any guidelines issued under section 23 .
Non-exhaustive list of options as respects payments for inclusion in Personal Insolvency Arrangement.
100.— (1) Subject to the provisions of this Act, a proposal for a Personal Insolvency Arrangement may incorporate one or more of the options in subsection (2) with respect to payments to creditors.
(2) The terms of a proposal for a Personal Insolvency Arrangement may include any one or more of the following:
(a) a lump sum payment to creditors, whether provided from the debtor’s own resources or from the resources of other persons;
(b) a payment arrangement with creditors;
(c) an agreement by the debtor to transfer some or all of the debtor’s property to a person (who may be the personal insolvency practitioner) to hold the property in trust for the benefit of the creditors;
(d) a transfer of specified assets of the debtor to creditors generally or to a specified creditor;
(e) a sale of specified assets of the debtor by or under the supervision of the personal insolvency practitioner and the payment of the proceeds of such sale to creditors; or
(f) in respect of secured debts, subject to sections 102 to 105 , an arrangement for the treatment of the security and the satisfaction or restructuring of the secured debt.
(3) Unless provision is otherwise made in the Personal Insolvency Arrangement, and subject to section 101 , the arrangement shall provide for payments to creditors of the same class to be made on a pari passu basis, and where so otherwise provided the Personal Insolvency Arrangement shall specify the reasons for such provision being made.
(4) Unless provision is otherwise made in the Personal Insolvency Arrangement, where an Arrangement provides for payments to a creditor to whom section 92 applies that are greater than the payments that creditor would receive if such payments were made on a pari passu basis, the fees, costs and charges referred to in section 99 (2)(f) shall be payable by that creditor in proportion to the payments received by him or her.
(5) The payment of moneys or the performance of obligations provided for by a Personal Insolvency Arrangement may be secured by a charge given by the debtor or a charge or guarantee given by a person other than the debtor.
(6) Subject to the provisions of this Act the terms of a Personal Insolvency Arrangement may include provisions relating to payments other than those specified in this section.
Preferential debts in Personal Insolvency Arrangement.
101.— (1) Unless the creditor concerned otherwise agrees in writing and provision is so made in the terms of the Personal Insolvency Arrangement, a preferential debt shall, subject to subsection (3), be paid in priority by the debtor and where those debts are to be paid in priority the provisions of section 81 of the Bankruptcy Act 1988 shall apply with all necessary modifications.
(2) In notifying creditors of the issue of a protective certificate the personal insolvency practitioner shall indicate that any creditor who considers some or all of his or her debt to be a preferential debt is required to furnish evidence of the circumstances of how that debt or part of that debt is claimed to be a preferential debt within such reasonable period as may be specified, and that in the absence of such evidence, the proposal for a Personal Insolvency Arrangement may be prepared on the basis that the debt concerned is not a preferential debt.
(3) Where a creditor fails to satisfy the personal insolvency practitioner that his or her debt is a preferential debt, the debt shall be treated as not being a preferential debt for the purposes of a Personal Insolvency Arrangement.
(4) Subsection (1) shall not affect the operation of section 103 unless the relevant secured creditors otherwise agree.
(5) In this Chapter, “preferential debt” means a debt which, if the debtor concerned were a bankrupt would be a debt—
(a) that by virtue of section 81 of the Bankruptcy Act 1988 is to be paid in priority to all other debts, or
(b) that by virtue of any other statutory provision is to be included among such debts.
Secured creditors and Personal Insolvency Arrangement.
102.— (1) Where a secured creditor has been notified by the personal insolvency practitioner that a protective certificate has been issued in respect of the debtor the secured creditor concerned shall furnish to the personal insolvency practitioner an estimate, made in good faith, of the market value of the security and the creditor concerned may also indicate, a preference as to how, having regard to subsection (3) and sections 103 to 105 , that creditor wishes to have the security and secured debt treated under the Personal Insolvency Arrangement.
(2) In formulating the proposal for a Personal Insolvency Arrangement the personal insolvency practitioner shall—
(a) have regard to subsection (3) and sections 103 to 105 , and
(b) to the extent that he or she considers it reasonable to do so, have regard to the preference of the secured creditor furnished under subsection (1) as to the treatment of the security and the secured debt.
(3) Subject to sections 103 to 105 , the terms of a Personal Insolvency Arrangement may provide for the manner in which the security for a secured debt is to be treated which may include:
(a) the sale or any other disposition of the property or asset the subject of the security;
(b) the surrender of the security to the debtor; or
(c) the retention by the secured creditor of the security.
(4) Failure by the secured creditor to furnish valuation and the indication of preference relating to the security under subsection (1) within the period specified by the personal insolvency practitioner or such further period as may be offered by him or her shall not prevent the personal insolvency practitioner from formulating a proposal for a Personal Insolvency Arrangement.
(5) Where a Personal Insolvency Arrangement provides for the sale or other disposal of the property which is the subject of the security for a secured debt, and the realised value of that property is less than the amount due in respect of the secured debt, the balance due to the secured creditor shall abate in equal proportion to the unsecured debts covered by the Personal Insolvency Arrangement and shall be discharged with them on completion of the obligations specified in the Personal Insolvency Arrangement.
(6) Without prejudice to the generality of section 100 or subsections (1) to (3) and subject to sections 103 to 105 , a Personal Insolvency Arrangement may include one or more of the following terms in relation to the secured debt:
(a) that the debtor pay interest and only part of the capital amount of the secured debt to the secured creditor for a specified period of time which shall not exceed the duration of the Personal Insolvency Arrangement;
(b) that the debtor make interest-only payments on the secured debt for a specified period of time which shall not exceed the duration of the Personal Insolvency Arrangement;
(c) that the period over which the secured debt was to be paid or the time or times at which the secured debt was to be repaid be extended by a specified period of time;
(d) that the secured debt payments due to be made by the debtor be deferred for a specified period of time which shall not exceed the duration of the Personal Insolvency Arrangement;
(e) that the basis on which the interest rate relating to the secured debt be changed to one that is fixed, variable or at a margin above or below a reference rate;
(f) that the principal sum due on the secured debt be reduced provided that the secured creditor be granted a share in the debtor’s equity in the property the subject of the security;
(g) that the principal sum due on the secured debt be reduced but subject to a condition that where the property the subject of the security is subsequently sold for an amount greater than the value attributed to that property for the purposes of the Personal Insolvency Arrangement, the secured creditor’s security will continue to cover such part of the difference between the attributed value and the amount for which the property is sold as is specified in the terms of the Personal Insolvency Arrangement;
(h) that arrears of payments existing at the inception of the Personal Insolvency Arrangement and payments falling due during a specified period thereafter be added to the principal amount due in respect of the secured debt; and
(i) that the principal sum due in respect of the secured debt be reduced to a specified amount.
(7) Subject to subsections (3)(b), (9) and (10) a creditor who has registered a judgment mortgage against a debtor more than three months before the Insolvency Service’s issue of the protective certificate is a secured creditor for the purposes of a Personal Insolvency Arrangement.
(8) Where requested by the personal insolvency practitioner to do so, a secured creditor shall provide proof of the existence and nature of the security with respect to the relevant secured debt, in default of which, the personal insolvency practitioner may treat the debt as unsecured debt for the purposes of this Chapter.
(9) Notwithstanding subsection (1) where the market value of the security held by a secured creditor in respect of a secured debt is less than 10 per cent of the amount of that secured debt, the secured creditor may, upon giving notice in writing to the personal insolvency practitioner, elect to be treated as an unsecured creditor for the purposes of this Chapter, other than this subsection and subsection (10).
(10) Where the personal insolvency practitioner receives notice of an election referred to in subsection (9), the personal insolvency practitioner shall formulate the proposal for the Personal Insolvency Arrangement on terms providing for the surrender of the security to the debtor and shall treat the creditor as an unsecured creditor for the purposes of this Chapter, other than this subsection and subsection (9).
(11) Without prejudice to section 103 , where a Personal Insolvency Arrangement includes terms providing for a reduction of the amount of debt (including principal, interest and arrears) secured by the security as of the date of the issue of the protective certificate to a specified amount, the terms of the Arrangement shall, unless the relevant secured creditor agrees otherwise, also include a term providing that the amount of such reduction shall:
(a) rank equally with, and abate in equal proportion to, the unsecured debts covered by the Arrangement; and
(b) be discharged with those unsecured debts on completion of the obligations specified in the Arrangement.
Protections for secured creditors in Personal Insolvency Arrangement.
103.— (1) A Personal Insolvency Arrangement which includes terms providing for the sale or other disposal of the property the subject of the security shall, unless the relevant secured creditor agrees otherwise, include a term providing that the amount to be paid to the secured creditor shall amount at least to—
(a) the value of the security determined in accordance with section 105 ; or
(b) the amount of the debt (including principal, interest and arrears) secured by the security as of the date of the issue of the protective certificate,
whichever is the lesser.
(2) A Personal Insolvency Arrangement which includes terms providing for—
(a) retention by a secured creditor of the security held by that secured creditor, and
(b) a reduction of the principal sum due in respect of the secured debt due to that secured creditor to a specified amount,
shall not, unless the relevant secured creditor agrees otherwise, specify the amount of the reduced principal sum referred to in paragraph (b) at an amount less than the value of the security determined in accordance with section 105 .
(3) A Personal Insolvency Arrangement which includes terms involving—
(a) retention by a secured creditor of the security held by that secured creditor, and
(b) a reduction of the principal sum due in respect of the secured debt due to that secured creditor to a specified amount,
shall, unless the relevant secured creditor agrees otherwise, also include terms providing that any such reduction of the principal sum is subject to the condition that, subject to subsections (4) to (13), where the property the subject of the security is sold or otherwise disposed of for an amount or at a value greater than the value attributed to the security in accordance with section 105 , the debtor shall pay to the secured creditor an amount additional to the reduced principal sum calculated in accordance with subsection (4) or such greater amount as is provided for under the terms of the Personal Insolvency Arrangement.
(4) Subject to subsections (5) to (13), the additional amount referred to in subsection (3) shall be the lesser of—
(a) the entire of the difference between the value of the property on disposition and the value attributed to the security in accordance with section 105 , and
(b) the amount of the reduction in the principal sum due in respect of the secured debt under the Personal Insolvency Arrangement as referred to in subsection (3)(b).
(5) For the purposes of subsection (4), any portion of the increase in the value of the property attributable to significant improvements made to (or other measures taken which have made a material contribution to the increase in the value of) the property over which the debt is secured which were made subsequent to the valuation of the security for the purposes of the Personal Insolvency Arrangement shall be disregarded in calculating the additional amount payable by the debtor.
(6) Subsection (5) shall not apply unless the secured creditor has given his or her consent in writing to the improvements or other measures concerned, which consent shall not be unreasonably withheld.
(7) For the purposes of subsection (4), any payment or transfer of assets to the secured creditor pursuant to the Personal Insolvency Arrangement properly attributable to a reduction of the principal sum due in respect of the secured debt shall be deducted from the additional amount referred to in subsection (3).
(8) For the purposes of subsection (4), the expenses and costs borne by the debtor in connection with the sale or other disposal of the property shall, to the extent that those costs and expenses are of a type and amount normally payable by the vendor of property of that nature, be deducted from the value attributable to the property on such sale or disposal.
(9) The obligation to pay an additional amount arising by virtue of this section shall not apply where the value of the property on its sale or other disposal is less than the amount of the debt secured by the security (other than any additional amount secured by virtue of subsection (10)) immediately prior to such sale or other disposition of the property.
(10) Any additional amount payable by virtue of this section shall stand secured in the same manner and with the same priority as the principal sum referred to in subsection (3)(b).
(11) The obligation to pay an additional amount arising by virtue of this section shall cease—
(a) on the expiry of the period of 20 years commencing on the date on which the Personal Insolvency Arrangement comes into effect, or
(b) on the day on which the debtor is scheduled or permitted to fully discharge the amount secured by the security (or such later date as may be specified for so doing in the Personal Insolvency Arrangement) and does so discharge his or her indebtedness,
whichever first occurs.
(12) Unless otherwise provided for under the terms of the Personal Insolvency Arrangement, where a property in respect of which subsection (3) applies is the subject of security held by more than one secured creditor—
(a) any additional amounts payable by virtue of this section to the secured creditors shall be paid in order of the priority of the security held by each secured creditor, and
(b) if the security held by a secured creditor is not ranked first in priority, the obligation to pay an additional amount to that creditor arising by virtue of this section shall apply only if and to the extent that the sum of the additional amounts payable to secured creditors holding security with higher ranking priority than the secured creditor concerned is less than the additional amount calculated in accordance with subsection (4).
(13) For the purposes of subsection (3)—
(a) without prejudice to the generality of that subsection, a disposal by a debtor of property the subject of security held by a secured creditor shall include the voluntary grant by the debtor of security over that property to any person other than that secured creditor, including any such grant of security in connection with what is commonly known as a refinancing of the existing secured debt, and
(b) a debtor shall not be considered to dispose of property the subject of security held by a secured creditor where the debtor leases or licenses the property to any person for a term of less than 20 years.
Principal private residence in Personal Insolvency Arrangement.
104.— (1) In formulating a proposal for a Personal Insolvency Arrangement a personal insolvency practitioner shall, insofar as reasonably practicable, and having regard to the matters referred to in subsection (2), formulate the proposal on terms that will not require the debtor to—
(a) dispose of an interest in, or
(b) cease to occupy,
all or a part of his or her principal private residence and the personal insolvency practitioner shall consider any appropriate alternatives.
(2) The matters referred to in subsection (1) are—
(a) the costs likely to be incurred by the debtor by remaining in occupation of his or her principal private residence (including rent, mortgage loan repayments, insurance payments, owners’ management company service charges and contributions, taxes or other charges relating to ownership or occupation of the property imposed by or under statute, and necessary maintenance in respect of the principal private residence),
(b) the debtor’s income and other financial circumstances as disclosed in the Prescribed Financial Statement,
(c) the ability of other persons residing with the debtor in the principal private residence to contribute to the costs referred to in subsection (2), and
(d) the reasonable living accommodation needs of the debtor and his or her dependants and having regard to those needs the cost of alternative accommodation (including the costs which would necessarily be incurred in obtaining such accommodation).
(3) Where—
(a) the debtor confirms in writing to the personal insolvency practitioner that the debtor does not wish to remain in occupation of his or her principal private residence, or
(b) the personal insolvency practitioner, has, having discussed the issue with the debtor, formed the opinion that, taking account of the matters referred to in subsection (2), the costs of continuing to reside in the debtor’s principal private residence are disproportionately large,
the personal insolvency practitioner shall not be required to formulate the proposal for a Personal Insolvency Arrangement on terms that will not require the debtor to cease to occupy his or her principal private residence.
(4) A Personal Insolvency Arrangement shall not contain terms providing for a disposal of the debtor’s interest in the principal private residence unless—
(a) the debtor has obtained independent legal advice in relation to such disposal or, having been advised by the personal insolvency practitioner to obtain such legal advice, has declined to do so, and
(b) to the extent that the provisions of the Family Home Protection Act 1976 or the Civil Partnership and Certain Rights and Obligations of Cohabitants Act 2010 apply to the property, all relevant provisions of those Acts are complied with.
Valuation of security.
105.— (1) Subject to the provisions of this section the value of security in respect of secured debt for the purposes of this Chapter shall be the market value of the security determined by agreement between the personal insolvency practitioner, the debtor and the relevant secured creditor.
(2) Where the personal insolvency practitioner does not accept a secured creditor’s estimate of the value, if any, of the security furnished by the secured creditor under section 102 , the debtor, the personal insolvency practitioner and the secured creditor shall in good faith endeavour to agree the market value for the security having regard to any matter relevant to the valuation of security, including the matters specified in subsection (5).
(3) In the absence of agreement as to the value of the security, the personal insolvency practitioner, the debtor and the relevant secured creditor shall appoint an appropriate independent expert to determine the market value for the security having regard to any matter relevant to the valuation of security, including the matters specified in subsection (5).
(4) Where the personal insolvency practitioner, the debtor and the secured creditor are unable to agree as to the independent expert to be appointed under subsection (3) the issue may be referred by any of them to the Insolvency Service which shall appoint such independent expert as it considers appropriate to determine the market value of the security concerned having regard to any matter relevant to the valuation of security, including the matters specified in subsection (5), and the valuation carried out by such expert shall be binding on the personal insolvency practitioner, the debtor and the secured creditor concerned.
(5) The matters referred to in subsections (2) to (4) as the matters specified in subsection (5) are:
(a) the type of property the subject of the security;
(b) the priority of the security;
(c) the costs of disposing of the property the subject of the security;
(d) the price at which similar property to that which is the subject of the security has been sold within the 12 months prior to the issue of the protective certificate;
(e) the date of the most recent valuation or transaction with respect to the property the subject of the security and the value attributed to the property in respect of that valuation or transaction;
(f) the value attributed to the property the subject of the security in the debtor’s accounting records (if any);
(g) the value attributed to the security in the secured creditor’s accounting records (if any);
(h) whether the market for the type of property the subject of the security is or has been subject to significant changes in conditions;
(i) data made available to the public by the Property Services Regulatory Authority pursuant to Part 12 of the Property Services (Regulation) Act 2011 and which relate to property similar to the property the subject of the security; and
(j) any relevant statistical index relating to the valuation of the same or similar types of property as the property the subject of the security.
(6) In this section “market value”—
(a) as respects property the subject of security for a secured debt, means the price which that property might reasonably be expected to fetch on a sale in the open market;
(b) as respects security for a secured debt, means the amount that might reasonably be expected to be available to discharge that secured debt, in whole or in part, following realisation of the security by the secured creditor concerned and, where permitted by the terms of the security or otherwise, after deducting all relevant costs and expenses in connection with the realisation of the security.
(7) The creditor concerned and the personal insolvency practitioner shall each pay 50 per cent of the costs of carrying out the valuation by the independent expert pursuant to subsection (3) or (4).
(8) The amount paid by the personal insolvency practitioner pursuant to subsection (7) shall be treated as an outlay for the purposes of the Personal Insolvency Arrangement.
(9) For the purposes of this section, the personal insolvency practitioner, the debtor, the secured creditor concerned and any independent expert shall be entitled to assume, in the absence of any clear evidence to the contrary, that the market value of the security which is a first charge is the lesser of—
(a) an amount equal to the market value of the property the subject of the security, or
(b) unless the nature of the security and the property concerned would make it unreasonable to do so, an amount equal to the market value of the property the subject of the security less an adjustment to that value as respects the costs and expenses which would normally be necessarily incurred by a secured creditor in the realisation of a security of a similar kind to that of the security concerned, provided that the adjustment is no greater than 10 per cent of the market value of the property the subject of the security.