Insolvency: thousands of Britons could cut debt as advice changes
Thousands of Britons could have their debts written off or monthly repayments slashed after the government told insolvency advisers to consider the impact of the cost of living crisis on people’s ability to keep up with repayments.
The Insolvency Service has issued new guidance on the oversight of individual voluntary arrangements (IVAs), repayment plans agreed with creditors that enable problem debts to be repaid over an agreed length of time.
The advice notes that existing agreements may have been drafted before the individual had knowledge of the “current financial climate, rising inflation, and increases to energy and other household outgoings”. These pressures “may have an impact on a consumer’s ability to be able to make monthly contributions … at the same level as previously agreed”, it adds.
The move comes at a time when 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. Separate government figures show 6,300 to 7,800 IVAs being registered a month over the past year.
Sara Williams, a former debt adviser and the founder of the website Debt Camel, says anyone with problems should talk to their IVA firm now: “There is no need to wait until your next annual review.”
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% of current contributions, falling to a minimum of £75. If monthly payments were to drop below that level the insolvency practitioner
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