TThousands of Britons may have to pay off their debts or reduce their monthly payments after the government talks about the impact of the cost of living crisis on the ability of bankruptcy advisers to adjust to the public debt.
The Insolvency Service has issued new guidelines under the supervision of Personal Voluntary Arrangements (IVAs), a loan repayment plan that enables lenders to repay problem loans within an agreed period.
The suggestion states that existing agreements may be drafted before knowledge of “the current financial climate, rising inflation, and energy outflows and other household outflows” is realized. These pressures can “affect a customer’s ability to make monthly contributions একই at the same level as previously agreed,” it adds.
The move comes at a time when more and more people are struggling to cope with rising food, fuel and energy bills. There were 81,199 IVAs registered in England and Wales in 2021 – the highest since records began in 1990 – according to the Office for National Statistics, while 23,997 were registered in the first three months of 2022. Individual government figures show that 6,300 to 7,800 IVAs have been registered over the past month.
Sarah Williams, a former loan advisor and founder of the Date Camel website, says anyone with a problem should talk to their IVA firm right now: “You don’t have to wait until the next annual review.”
The Insolvency Service says advisers should consider requests from people who want to reduce their monthly payments, as creditors are generally willing to accept a reduction of up to 50% of current contributions, which fall to a minimum of £ 75. If monthly payments fall below that level, the bankrupt practitioner should consider whether the contract should be terminated as soon as possible based on the payments already planned.
Decisions are made on a case-by-case basis, and all lenders must agree to the proposal. Bankruptcy practitioners also need to consider whether an alternative approach, such as a debt relief order or bankruptcy, would be more appropriate.
Stepchange says the changes mean “now, for the first time, there is a realistic chance that their lenders will agree to an early termination of IVA based on the funds provided so far.” Peter Wordsworth, head of the bankruptcy service at the loan charity, added: “This is a very welcome and realistic development in light of the cost of the life crisis.
“Creditors are now more acceptable for early completion of IVA where it is the most realistic option for people who would otherwise fail IVAs, and where lenders are less likely to get a higher refund if the client needs to take an alternative loan solution, for example a loan relief order. . “
An IVA is a system of repaying all or part of your debt even though it pays regularly to a bankrupt practitioner, who then divides the money among the lenders, who distribute the funds among the lenders. This can start if 75% of the creditors agree and it also applies to those who do not agree with it.
The goal of the new advice is to avoid the collapse of an IVA, which can have significant consequences for the individual. If this happens, the individual may be liable to repay the entire balance of their debt and cover IVA costs and fees and may be at risk for the action taken by the lenders.
“If you are unable to bear the cost of this reduced payment, or they can hold your IVA for more than seven years, or now qualify for another option, such as a debt relief order, practitioners should consider whether an initial settlement is being offered. Graham O’Malley, a senior loan expert at Citizens Advice, says the money you’ve already paid is a viable option.
“Whether the initial settlement is an option for you will depend on what your practitioner says, and ultimately, all the organizations to which you owe money must agree to this formal change in your contract.”