Insolvency Service

3. Mrs T complains that when her son filed for bankruptcy with the Insolvency Service (IS), he was not fully informed about the conditions of an income payments agreement (IPA). She also says the IS did not adequately consider her son’s severe dyslexia when he agreed to the IPA.

4. Mrs T says this situation caused her significant anger and distress, and that it greatly affected her son’s mental health and employment prospects.

5. Mrs T would like the IS to accept that her son’s agreement to the IPA was a mistake and to discharge him from the IPA after 12 months or annul the bankruptcy. She also wants the IS to ensure it follows the relevant legislation when dealing with vulnerable individuals.

6. In February 2024, Mrs T says her son spoke with Citizens Advice and it was agreed that he should apply for bankruptcy. Mrs T understood that the bankruptcy would last 12 months in line with the legislation. She says she was not made aware that an IPA could run for up to 36 months.

7. At the start of June 2024, Mrs T’s son made an online application for bankruptcy.

8. In mid-June 2024, the IS carried out an income and expenditure assessment. Based on the information provided, the IS proposed an IPA which included a nil tax (NT) element of £207 per month. A nil tax IPA operates where HMRC applies a nil tax code, meaning income tax is not deducted from wages and the equivalent amount is instead paid into the bankruptcy estate. This arrangement is temporary, usually lasting until the end of the tax year, and can change if employment or income changes.

9. The IPA was not signed at this stage. Towards the end of June, a further wage slip and updated income and expenditure information were provided. The IS revised the proposed IPA to a monthly contribution of £162 and a nil tax element of £250 and invited Mrs T’s son to comment.

10. Mrs T’s son replied by email stating that he was unsure about the figures but was willing to proceed with the IPA.

11. At the start of July, Mrs T raised concerns about fluctuations in her son’s income. The IS amended the IPA to a £120 monthly contribution with a nil tax element of £250. Around the same time, Mrs T’s son reported an essential expense for new tyres costing £240. The IS requested a receipt so it could consider delaying the start of payments. The agreement and an explanatory letter were sent for countersignature to Mrs T’s son.

12. Towards the end of August, Mrs T sent documents to Advantis, the IS’s collection agent. She also informed the IS that her son’s tax code had changed due to a change in employer and reduced income.

13. At the start of September, Mrs T sent further wage slips and the tyre receipt. The IS then advised that her son should stop making nil tax IPA payments. This was because the nil tax arrangement could no longer apply. The IS explained that Mrs T’s son would need to contact HMRC so that his standard tax code could be reinstated.

14. Shortly afterwards, Mrs T informed the IS that she would be representing her son.

15. In mid-September, Mrs T told the IS that her son would not sign a further variation of the IPA, as she believed the agreement should be cancelled entirely. This was also discussed by telephone.

16. Throughout October, the IS sent reminders to Mrs T’s son to sign the revised IPA. The IS also explained to Mrs T that the IPA end date remained 2 July 2027. The IS offered to bring the case back in house due to concerns about Advantis’ handling.

17. Mrs T complained to the IS in mid-December 2024. The IS responded in mid-January 2025. It explained that bankruptcy lasts 12 months, but an IPA can last up to 36 months. The IS partially upheld the complaint, apologising that documents had to be sent multiple times and for some of the language used in correspondence. It said staff training would be carried out.

18. The IS said it considered that Mrs T representing her son addressed his dyslexia-related needs. It explained it would correspond with Mrs T about the IPA, but that her son also needed to understand the agreement himself. The IS confirmed the case was brought back in house in late January.

19. Mrs T remained dissatisfied and submitted a further complaint in early February. The IS responded on 24 February and did not uphold the complaint, as it had not identified fault in how the IPA was issued.

20. Mrs T raised her complaint with us via her MP in April.

Mrs T complains that when her son filed for bankruptcy with the Insolvency Service (IS), he was not fully informed about the conditions of an income payment agreement (IPA).

23. Before we decide if we should conduct a detailed investigation of a complaint, we look at whether there are signs the organisation has got something wrong. We do this by comparing what should have happened with what did happen. We have done this and have not found any indications that something has gone wrong.

24. Mrs T’s son signed the IPA agreement at the beginning of July 2024. The wording in this agreement stated that the payments would run for a total of 36 months and would end around the start of July 2027.

25. In the IS’s final complaint response in February 2025, it clarified that the IPA was varied to £0 per month at the start of September 2024. The IS explained this was a variation to an existing agreement and not the start of a new one.

26. Section 310A (5) of the Insolvency Act 1986, sets out how long an an IPA can be implemented, and we have refenced this below:

(5) An income payments agreement must specify the period during which it is to have effect; and that period—

(a) may end after the discharge of the bankrupt, but (b) may not end after the period of three years beginning with the date on which the agreement is made.

27. We have also considered the purpose of an IPA and the role of the Insolvency Service (IS) in administering bankruptcy. Under the Insolvency Act 1986, the IS has a statutory duty to act in the interests of creditors as well as the bankrupt individual. An IPA is a mechanism intended to ensure that where a bankrupt person has surplus income, they make a fair contribution towards their bankruptcy estate for the benefit of creditors.

28. This reflects the underlying principle of bankruptcy legislation, which seeks to balance the relief provided to an individual who cannot pay their debts with the need to treat creditors fairly. The IS is therefore required to assess income and expenditure and, where appropriate, to seek an IPA. While the IS must take account of individual circumstances, including vulnerability, it is not able to disregard potential contributions altogether where the legislation allows for them and where income is available

29. In this case, we have seen that the IS assessed Mrs T’s son’s income on several occasions, amended the IPA when his circumstances changed, and ultimately varied the agreement to £0 per month when his income reduced. This demonstrates that the IS continued to balance its duty to creditors with its responsibility to act reasonably and proportionately in light of Mrs T’s son’s circumstances.

30. We have found that Mrs T’s son was made aware of the conditions of the IPA when the IS informed him of the amount of time the agreement was in place (36 months) and when it would end (July 2027). Whilst we understand that Mrs T felt that the IPA should end when her son’s bankruptcy did, we have not found any indication that the IPA got something wrong here. This is because an IPA is sperate to bankruptcy as refenced in the legislation above.

31. We have seen that the IS explained to Mrs T’s son the initial terms and conditions of the IPA and also again in its complaint responses. We have found that the IS acted in line with our Principles of Good Administration, getting it right. This principle sets out that we expect public bodies to act in line with its statutory powers and duties. We have found that the IS have done this by acting reasonably and in line with the Insolvency Act 1986.

32. We recognise Mrs T’s concern that neither she nor her son appear to have fully understood the implications of an IPA but we cannot say this was the result of a failing on the IS’s part. As such we have not found that anything went wrong here.

Mrs T complains the IS did not consider that her son had severe dyslexia when he signed the IPA.

33. We have considered whether the IS took account of Mrs T’s son’s dyslexia. While we recognise the challenges dyslexia can present, we have not seen evidence that the IS failed to make reasonable adjustments. The evidence we have seen shows Mrs T was present during the initial IPA assessment call. This was because the IS had been notified of her son’s dyslexia and had agreed that Mrs T could assist him. The evidence also shows that the IS continued to allow Mrs T to formally represent her son during his further dealings with the organisation.

34. The evidence also shows that Mrs T’s son consented to the IPA, and although he expressed uncertainty about the figures, he, and Mrs T, had the opportunity to seek clarification before agreeing to this.

35. We have seen that the IS acted in line with Principles of Good Administration, being customer focused, by involving Mrs T, explaining the IPA verbally, and responding to concerns about income changes.

36. We recognise Mrs T’s concern for both her son’s financial situation and the effect this appears to be having on his welfare and mental wellbeing, describing this as ‘soul-destroying’. We can also understand her desire to seek alternative solutions for discharging her son’s debt.

37. As we have explained, the IS has a responsibility to both the creditors and the debtor in situations such as this. However, we would expect it to be flexible in its approach. The evidence shows that the IS has met this expectation. In response to Mrs T’s complaint, the IS made clear that it would keep her son’s circumstances under review and would assess his contributions to the IPA appropriately. As we have said elsewhere, the IS had made similar adjustments previously and we have seen nothing to suggest it would not be prepared to do so again.

38. Whilst we cannot say the IS can, or should, cancel the IPA and/or the bankruptcy, we are satisfied the IS’s approach is line with our Principles of Good Administration - being customer focussed – under which we expect organisations to treat people with sensitivity, bearing in mind their individual needs, and respond flexibly to the circumstances of the case.

39. We understand this is likely not the outcome Mrs T was hoping for. We would like to thank her for the opportunity to investigate the concerns in her complaint and hope we have clearly explained our decision.

1. We have carefully considered Mrs T’s complaint about the IS. We have seen no indication that anything went seriously wrong

2. Mrs T complains on behalf of her son about the IS and its implementation of an income payment agreement (IPA). We recognise the distress and frustration this situation caused Mrs T and her son, and the impact this had on their wellbeing.