Insolvency Service adjusts IVA payment rules
The Insolvency Service is to overhaul the Individual Voluntary Arrangement (IVA) regime in the wake of the cost of living crisis.
Individual Voluntary Arrangements are legally binding court-approved agreements that people make to pay all or part of the debts they owe. An IVA is a statutory insolvency procedure managed by an insolvency practitioner (IP) who ensures that creditors are paid equally.
But the Government recently asked IPs to consider how rising prices impact a contributor’s ability to meet their IVA obligations. Accordingly, contributors will be able to cancel or lower monthly IVA payments under the new plans.
Financial pressures
Ironically, increasing financial pressures may lead some people to take on more credit while having less means to pay. Sadly, these are the types of situations that will bring about the ‘debt tsunami‘ we recently discussed.
Data from the Office for National Statistics reveals that after the Covid-19 lockdowns in England and Wales:
- 23,997 people registered for IVAs in the first three months of 2022
- 81,199 people registered for IVAs in 2021 (the highest figure since records began in 1990)
Of course, any decision to amend a person’s Individual Voluntary Arrangement payments:
- Must be agreed by all creditors
- Will be reviewed by IPs on a case by case basis
- Is dependent on the amount of contributions they have already made
IVA or bankruptcy?
Furthermore, IPs must evaluate whether bankruptcy would be more appropriate before agreeing to an IVA payment reduction. The purpose of this new advice is to prevent IVAs collapsing, which would be devastating and negatively impact the individual.
If an IVA collapses without an agreement in place, contributors could be:
- Liable to pay the full balance of debts, plus fees
- Vulnerable to creditors taking action against them
Reach out for help and call 0207 5041300 if you are struggling to pay an Individual Voluntary Arrangement (IVA).