Chapter 20 Annex 3

							                                                                         Annex 3

                                 EXAMPLE 2

In this example the bankrupt has excluded his interest in a property from the
FTVA but is agreeing to a higher monthly payment over a longer period.

Bankruptcy                                FTVA

Assets                           £        Assets                            £
Monthly IPO/IPA £50              1620     Monthly payment                         75
Over 3 years                              Over 5 years                          4500
(net of agents collection fee
of 10%)
Other available assets (list)             Other available assets                  0
Interest in property             1000     (list)(property excluded)

Total Assets                     2620     Total Assets                          4500

Expenses                                  Expenses
Case administration fee          1625     Refund 50% of case                    812
                                          administration fee
Petitioning creditors costs      1000     Petitioning creditors costs           1000
Estimated disbursements                   Estimated disbursements                  0
    Costs re: interest in
       property
                                  250
Distribution (time and rate)        0     Supervisor’s fee (15% -               675
plus VAT of 17.5%                         Fee IVA3)
Secretary of State fee 17%        136


Total Expenses                   3011     Total Expenses                        2487

Available for creditors          -391     Available for creditors               2013

Notes

   1. This example calculates the FTVA income from monthly payments as 60
      times the monthly amount, assuming a 5 year arrangement.

   2. This example assumes that the nominee fee is paid by a third party, or
      from assets excluded from the bankruptcy.
   3. In this example there are no assets available for distribution to creditors in
      the bankruptcy.

   4. The Secretary of State’s administration fee (Fee B2) is calculated as 17%
      of total chargeable receipts up to £100,000 (excluding the first £2000).

   5. The bankruptcy deposit is excluded from both calculations above for the
      following reasons -

           a) The deposit is not included in the bankruptcy side of the calculation,
              as it does not make a significant difference.
           b) In an FTVA the bankruptcy deposit would be repaid to the person
              who made it. If it was a debtor’s petition it would be repaid to the
              bankrupt and the bankrupt should account for this in his proposal,
              but it is excluded from the above calculation as a specific item.

ASSUMPTIONS

Bankruptcy assumptions –

   1) Creditor’s petition
   2) Bankrupt is assessed for an IPO/IPA of £50 per month. Agents collection
      fee of 10% is charged on this and the agents account to the Official
      Receiver net of this fee.
   3) Bankrupt also has an interest in property at the de minimis level (below
      which an application to court to realise would be dismissed).
   4) A disbursement of £180 is payable to the official receiver’s contract agent
      for the collection of the IPO/IPA – currently 10% of monies collected.
   5) Secretary of State administration fee of 17% only charged on assets of
      more than £2000.

FTVA assumptions –

   1)   Bankrupt does not want to include his interest in property in his FTVA.
   2)   The bankrupt is willing to increase monthly payments to £75 over 5 years.
   3)   Refund of 50% of the case administration fee.
   4)   Supervisor’s Fee (Fee IVA3) – calculated as 15% of any monies realised.


CONCLUSION

This example is below the guideline figure of £5,000 worth of assets (see
paragraph 20.56).
However, other considerations to be taken into account when considering if an
  FTVA is financially viable include –

•   The level of liabilities. The higher the liabilities, the lower the p in the £
    available for distribution. e.g. If, in this case, there are liabilities of £20,000,
    creditors would only get 10p in the £ in the FTVA. If the liabilities are
    £200,000, then creditors would get 1p in the £. However, if the liabilities were
    significantly less, say £8,000, creditors would get 25p in the £ in the FTVA,
    but receive nothing in the bankruptcy.

•   The number of creditors. If there is only 1 creditor, the creditor might be
    willing to accept this proposal, as £2404 more is available in the FTVA than in
    the bankruptcy. However, if there are 20 creditors, it probably wouldn’t be
    worthwhile. The Supervisor’s fee of 15% on asset realisation has been set
    based on an average number of creditors and liabilities so it will be necessary
    to consider the economic viability of a case which has a lot of creditors.




The key considerations are -
• Will creditors be better off than they are in the bankruptcy?
• Are creditors likely to accept the proposal (p in £)?
• Is it economically viable for the OR to manage the distribution (number of
  creditors)?