A great number of lucrative claims have already been undertaken and carry on being undertaken against financial institutions in connection with Payment Protection Insurance (PPI). Any existing debtor who thinks that they might have been miss-sold a PPI policy is entitled to make a claim against the financial institution and numerous such people have already accepted settlements from the offending creditors.
In the circumstance of a consumer going into an Individual Voluntary Arrangement (IVA) where one or more financial institutions provided Payment protection insurance in the past, the debtor may make a claim for compensation against any lender which miss-sold such a policy. The fact that payment of the PPI premiums could have contributed to the borrower’s lack of ability to repay his or her outstanding debts and forced the consumer to enter an IVA is not relevant.
Should the person have a PPI claim in place in advance of going into an Individual voluntary arrangement, whatever damages handed over while the Individual voluntary arrangement is up and running shall be regarded as an asset and any funds given through time period of the Individual voluntary arrangement must be paid to the Individual voluntary arrangement for the benefit of the creditors.
The terms and conditions of the IVA proposal may allow for the creditor who is paying the compensation, to offset the payment against any debt due to that creditor and any surplus of the compensation which remains has to be paid into the IVA for the benefit of the other creditors. The contribution of some or all of such a windfall to the debtor’s IVA does not mean that the debtor can stop making the agreed monthly contributions for the full term of the IVA as originally agreed. Neither can the debtor reduce the amount of any other lump sum payment into the IVA which was proposed and agreed originally, such as equity in property. The compensation monies simply increase the amount of the debt that creditors will have repaid to them.
Many debtors in IVAs may feel that they want to maximize the amount of their debt that they will repay to creditors and for that reason want to pursue their PPI compensation claim forthwith and contribute any funds thus obtained to their IVAs. There is one other benefit which arises from doing this: if they run into trouble in making their monthly contributions to their IVA, due to loss of employment, ill health or other reasons, creditors may consider their PPI compensation lump sum payment to the IVA in a favourable light and deem the terms of the IVA to have been fulfilled, particularly where the originally promised dividend in the IVA has been achieved or exceeded. In such circumstances, creditors may agree to a reduction in the amount of the monthly payments to the IVA or even a reduction in the term of the IVA.
Written by Paddy Byrne 27 / 06 / 2011
(Article updated on 10 / 01 / 2012)