It’s hard to think that there could be something good to come out of the cost of living crisis. But, many could have their debts written off or have their monthly repayments slashed thanks to the government urging insolvency advisers to consider the effect the cost of living crisis is having on the UK public.
This does not constitute advice and advice should be sought in all instances before acting on it.
Individual voluntary agreements (IVAs) are repayment plans that have been agreed with creditors that enable problem debts to be repaid within an agreed upon timeframe. The Insolvency Service has recently issued new guidance on these plans, many of which were likely drafted before the “current financial climate, rising inflation, and increases to energy and other household outgoings.” All these factors may contribute to a person’s inability to make monthly payments.
The guidance comes at a time when many people are struggling to keep up with the rising costs of food, fuel, and energy. According to the Office for National Statistics, in 2021 in England and Wales, there were 81,199 IVAS registered, a record high. In the first three months of 2022 alone, there were 23,997 registered and government figures show that those numbers are only increasing each month.
If you feel like you could benefit, talk to your IVA firm now, no need to wait until you’re up for review. Creditors will usually accept reductions of up to 50% current contributions with a minimum of £75. If payments were to drop below that, and a significant number of payments have been made, your insolvency practitioner could choose to terminate the agreement early as long as debt relief or bankruptcy aren’t more appealing options. But decisions will be made on a case by case basis and all creditors involved will need to agree to the terms.
In light of the cost of living crisis affecting the nation, this could be a well-received and indeed highly pragmatic move in order to avoid thousands of failed IVAs.
For advice about how to reduce the impact of the cost of living crisis for you, get in touch with us today.