Summary: This article looks at the potential impact reclaiming payment protection insurance (PPI) may have on an Individual Voluntary Arrangement (IVA) whether it is ongoing, or after its completion.
Over the last few years, PPI has gained notoriety due to often being mis-sold to customers, and as a result many have been successful in reclaiming any amounts paid, as well as interest on top. While an unexpected windfall is greatly appreciated by most, how could this affect someone who is currently in an IVA.
It is usual for the IVA supervisor to conduct annual reviews in order to ascertain if there has been a change in circumstances. If the individual has seen a decrease to their finances, then it is possible that the monthly repayments could be reduced. However where there has been an increase in income from whatever source, it is likely the IVA repayments will be recalculated and increased according to what can reasonably be afforded. While reviews are carried out periodically, it is important for the individual to notify their IVA supervisor immediately of any changes to circumstances.
What happens to my IVA if my PPI claim has been successful?
Unlike a windfall, where some of it will need to be paid into the IVA, the current school of thought is that where IVAs and bankruptcy are concerned, PPI compensation is actually an asset, and therefore the whole amount can, and usually will be included within the IVA. It is vital that if an individual entering an IVA believes they have been mis-sold PPI at any time, they advise the IVA supervisor.
Can PPI compensation be taken from me after my IVA is completed?
When an individual completes their IVA, usually after a 5 year period, they will be issued with a certificate of completion. Once this has been received, no further money can be taken without authorisation. However, if the individual receives a windfall after the final payment, but before the issuing of the certificate, then some of the money could be taken for the IVA. That said, there are a number of complications surrounding PPI compensation that are currently receiving a lot of attention.
Complications with IVA closure and PPI compensation
As PPI compensation is considered an asset, it is required to be included in the IVA. The Insolvency Practitioner (IP) that supervises the IVA will want to ensure that the creditors receive as much of the debt back as possible, and so it is now common for the IP to submit a claim for PPI compensation on behalf of the individual. While this in itself does not pose a problem, due to often lengthy delays in reclaiming PPI, it may not be processed before the end of the IVA. This results in the IP delaying the certificate of completion until the compensation has been received. In some cases, this has been up to 2 years after the final payment of the IVA. The knock on effect is that the individual cannot move on as their details will still be logged on the Insolvency Register, and any other legitimate windfalls during this time could also be claimed by the IVA.
Anyone considering entering an IVA, who believes they may have outstanding PPI compensation due should make sure they seek independent advice from a licensed money advisor. When speaking to IVA providers, it is vital to ask questions to establish their policy on PPI and IVAs.