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Claiming PPI Compensation and IVAs

We are often asked by customers about claiming PPI compensation when they have issues with debt and arrears. In this article, we take a broad look at how compensation could affect your position as part of an IVA, but it is important you seek advice specific to your situation.

PPI Debt

Many people who contact us are unsure about how PPI compensation will ‘fit’ with their debt problems, especially if they have entered an Individual Voluntary Arrangement (IVA).

Unfortunately, there has been a lot on inconsistencies and confusion when it comes to payment protection insurance (PPI) compensation when people are part of IVA schemes. It relates to whether the compensation is classes as an asset or a windfall.

  • An asset is something that is ‘of value’ and could be used to pay off your debts, such as a car or equity you have in any property.
  • A windfall is something of value that were you were not entitled to at the start of the IVA - a common example is a lottery win.

IVA conditions vary from person to person, as well as the company who is arranging the IVA but generally speaking, any windfall, providing it does not exceed £500 can be kept but with PPI compensation, this has been less clear.

There has since been clarity on the issue and the three main points are summarised below;

  • PPI compensation is to be counted as an asset - in other words, it must be included in the IVA
  • Your IVA provider (known as an insolvency practitioner) has a legal obligation to maximise returns to creditors and must investigate and include all assets
  • It is very important that you tell your insolvency practitioner that you think you may have been mis-sold PPI

Can you still claim PPI compensation as part of an IVA?

In some cases, the addition of the expensive insurance policy to your debts may have put you deeper in debt but it is imperative that you speak to the company or person who has arranged your IVA.

Even though your PPI settlement (if there is one) will go to paying your creditors back, you will still benefit from claiming PPI compensation.

Some people have found that the amount of compensation they received was sufficient to repay their debts, leaving them debt-free earlier or significantly reducing the term of their IVA.

Can you still make a claim for PPI compensation yourself?

Yes, you can. You don’t need to use your insolvency practitioner or a claim management company, like Payment Protection Scotland but bear in mind that your situation is more complex because of the debt repayment scheme, as well as how PPI compensation is applied to debt.

Even if you do not have an IVA in place, you can contact us here for advice with regard to claiming PPI compensation and your debt problems. Call us now!

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