New guidelines could help thousands of Britons cut their debt
Companies have been told by the Government’s Insolvency Service to consider the impact of rising prices and its effect on household incomes – meaning debts could be written off or repayments halved.
As part of this call, the Insolvency Service has issued new guidance on individual voluntary arrangements (IVAs).
What are IVAs, and how do they work?
An IVA is an arrangement to pay all or part of your debts through regular payments to an insolvency practitioner, who then divides and distributes the money between creditors.
The new advice aims to avoid the collapse of an IVA, where the person could become liable to pay the full balance of their debt and cover IVA costs and fees and leave them vulnerable to enforcement action by creditors.
People worried about the cost of living, or their debt payment plans through IVAS, Income Payments Agreement or Income Payments Order are urged to speak with their trustees, insolvency practitioners, or a debt adviser.
How can payment be lowered?
The Insolvency Service says advisers should consider requests from people who want to lower their monthly payments, with creditors generally willing to accept reductions of up to 50 per cent of current contributions, falling to a minimum of £75.
If monthly payments were to drop below that level, the insolvency practitioner should consider whether to end the agreement early.
Decisions are case-by-case, and all creditors must agree to the proposal. The insolvency practitioner would also have to consider whether an alternative method, such as a debt relief order or bankruptcy, would be more appropriate.
Individual Voluntary Arrangements (IVA)
If you are in an IVA, you can ask your supervisor to review your income and expenses to see if you are eligible for a reduction in payments or payment break.
You must provide evidence of your income and expenditure and any amendments to your contributions to your IVAs.
Income Payments Agreements and Income Payments Orders
Again, you can ask for a review of your income and expenses to see if you are eligible for a reduction in payments or a payment break.
The spending guidelines have been updated for inflation, and if you feel you need a review, you should contact the organisation to which you make payments.
Need personal accounting advice? Contact our team today.
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