The affect of PPI on the length of an IVA

If you are in an Individual Voluntary Arrangement (IVA) you maybe asked to make claims for mis sold PPI. Normally your Insolvency Practitioner (IP) will instruct a claims management company to contact you. They will then undertake the work.

You will probably want to know what will happen to any compensation paid as a result of these claims. Will you be allowed to keep any of this money? If it is paid into your IVA does this mean that the Arrangement is then paid off faster?

What happens to PPI compensation received during an IVA?

If you receive a windfall while you are in an Individual Voluntary Arrangement it has to be paid into the agreement for the benefit of your creditors. PPI compensation is no different. Any money received as the result of PPI claims must paid to your Insolvency Practitioner.

Normally the compensation is paid directly to your IVA company. If it is paid to you, you are legally obliged to hand it over. Your IP may allow you to keep some of the money received. However they do not have to.

Will PPI compensation reduce the length of an IVA?

PPI compensation will generally not reduce the length of your Individual Voluntary Arrangement. After the money is paid in you will have to continue making your monthly payments as normal. You will still have the same number of payments outstanding.

The affect of receiving PPI compensation during an IVA is simply that the amount repaid to your creditors is increased. This happens because the amount you pay into the arrangement is not fixed. If you can afford to do so you always have to increase the amount you pay back through the Plan.

BMD Tip: There are some rare occasions where your IVA would be paid off early as a result of PPI compensation. For this to work the sum received would have to be large enough to repay 100% of your original debt in full (less the contributions you have already made) plus your IP’s fees and interest.

Could claiming for PPI extend the length of an IVA?

The idea that making PPI claims could extend the length of your IVA may seem strange. However it is certainly possible. Why? Because any outstanding claims could delay the issue of your Completion Certificate.

Your IP should send you a Completion Certificate within 8-12 weeks of you making your last IVA payment. This is important because until then the Arrangement is not formally over and you still have to hand over any windfalls received.

Your IP may therefore delay issuing your Certificate until any outstanding PPI claims are agreed. If they issue the certificate before this they could lose their claim on any subsequent compensation paid.

BMD Tip: If you have not received your Completion Certificate then you should contact your IP. If the delay is due to outstanding PPI claims you could request to sign a Deed of Assignment. Any compensation paid after this has to be handed over. However your Certificate can be issued and you to have closure on your IVA.

Do you have to agree to making PPI Claims during an IVA?

If you have started an Individual Voluntary Arrangement you are obliged to co-operate with your Insolvency Practitioner. If they make a reasonable request regarding the repayment of your debt you must agree to this. If you do not it could result in the failure of the agreement.

If your IP asks you to make PPI claims for the benefit of your creditors this is seen as a reasonable request. Generally speaking you will have to comply and allow the appointed claims company to act on your behalf.

Can you keep PPI compensation paid after an IVA is Completed?

If your IVA is already finished and you have not already made claims for mis sold PPI you can do sonow . It does not matter how long ago the Arrangement came to an end. You just need to be in possession of your Completion Certificate.

In these circumstances any compensation awarded should be paid to you. Having said that making your claims may not be straight forward. The banks could try to resist paying compensation because you have been through an IVA.

The banks often argue they are allowed to hold any compensation back to offset against the debt you did not repay them. In addition they may suggest that despite the completion of your IVA the compensation still has to be paid to your old IP. The best way to overcome this and get your money is to use  a specialist claims service to help you.

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