Coronavirus Finance & Payments Assist
In September, the Insolvency Service updated its coronavirus guidance around individual voluntary arrangements (IVAs) to give IVA users and their supervisors more options and flexibility if they are in financial difficulty.
If you’ve got an IVA – a legally binding debt repayment plan – and need extra help, it used to be that your supervisor had to ask your creditors to approve changes such as a payment break or reduced payments. This is called a ‘variation’ and can be a slow process.
However, the coronavirus guidance has been designed to increase the flexibility of variations and gives situations where the IVA supervisor can provide more help immediately with no need for approval from creditors.
The rules allow:
- Your IVA supervisor to approve up to an extra six months of payment breaks. Initially the supervisor will grant three months, then can approve a further three-month break.
- Your supervisor to approve a reduction in your monthly payments by up to 50% (the standard variation is 15%).
- Your supervisor to apply “discretion” when considering whether redundancy payments in excess of six months’ net take-home pay are required to be brought into the arrangement.
- Critical workers (as defined in the Government list) to be exempt from the rules around bonuses and overtime – usually these need to go towards the IVA if they’re over 10% of take-home pay.
- That no attempt should be made to release equity during the pandemic unless the debtor wants this. Instead the supervisor has discretion to extend the IVA for 12 months. The old rules say if you are in the last year of your IVA and have a home with equity you may have to try to remortgage to pay some equity into your IVA.
If you take a payment break, the extra months will be added on to the end of your IVA term, so it may last longer than the standard five years in your case.
You have until 20 April 2021 to apply for a payment break or reduction on your IVA. So if you’re meeting payments now but start to struggle further down the line, the option will still be around to help you.
We’ve more information on IVAs and how they work in our Debt Solutions guide – but if you’re in debt crisis, you should always, always take free debt advice before taking any serious formal steps. Citizens Advice, National Debtline and StepChange offer support and are there to help, not judge.
More leeway on trust deeds in Scotland
If you live in Scotland, the nearest equivalent to an IVA is a ‘trust deed’. These generally last four years, during which time you’ll pay an agreed amount to your creditors with any debt remaining written off. When you have a trust deed, all of your assets are passed on to someone who will look after your financial affairs, called a trustee.
Accountant in Bankruptcy, the Scottish equivalent of the Insolvency Service, has released guidance with a couple of measures to help people with trust deeds during the coronavirus crisis. These are:
- Encouraging trustees to decide not to increase the length of a trust deed beyond four years if someone is unable to make payments due to Covid-19. Normally, the four years can be extended if you fail to meet your payment obligations.
- Allowing trustees to discharge you from your debts at the end of your trust deed, even if you haven’t been able to meet your payments due to Covid-19. Normally, discharge can be refused if you haven’t made your payments.
To get a trust deed, you’ll need to find an insolvency practitioner (IP) to administer your debts. Any of the professional debt advice charities will be able to advise you on whether a trust deed is right for you, and how to find an IP.
Bankruptcy application fees in Scotland reduced and completely removed for some
Since 27 May, new legislation in Scotland means that people receiving certain benefits who are applying for bankruptcy (also known as ‘sequestration’) won’t pay any application fee at all.
The changes come as a response to the coronavirus crisis and will initially last until 30 September 2020, with a possibility of two six-month extensions.
You’ll be eligible to pay no fees for your bankruptcy application if you receive any of the following benefits:
- Universal credit
- Income-based jobseeker’s allowance
- State pension credit
- Child tax credits
- Income-related employment and support allowance
- Housing benefit
- Income support
- Working tax credit, as long as you’re also receiving child tax credit, there is a disability or severe disability element to your tax credit and your gross annual income is £18,000 or less
The fees for those who don’t qualify for the exemption have also been reduced as follows:
- The fee for ‘minimum asset’ bankruptcies is now £50 (was £90). This is an option if you have few assets (see full criteria).
- The fee for ‘full administration’ bankruptcies is now £150 (was £200). You have to apply for this type of bankruptcy if you don’t meet the criteria for minimum asset bankruptcy.
The Insolvency Services for England & Wales and Northern Ireland have confirmed that there are no current plans to change the administration fees for bankruptcy in their jurisdictions.