PPI Compensation during an IVA

PPI Compensation during an IVA

If you receive PPI Compensation during your IVA it is treated as a windfall. As such it will have to be paid into the Arrangement.

Jump to article content:

The deadline for claiming for PPI was 29th August 2019. If you did not make your claims before that date you are no longer eligible. No new PPI claims can now be submitted.

Do you have to claim for PPI Compensation during your IVA?

Your IVA Company will usually ask you to claim for PPI compensation during the Arrangement. They are obliged to maximise the amount you pay back to your creditors and claiming for PPI is a good way of doing this.

You cannot refuse the request. You must cooperate with any reasonable demands that your Insolvency Practitioner (IP) makes. If you do not it could be grounds for them to fail the Arrangement.

The claims will usually be made by a third party claims management company working on behalf of your IP. This organisation will undertake all the work. You will not have to do anything except give your authorisation.

What happens to PPI Compensation paid during an IVA?

Any PPI compensation paid to you during your IVA is considered a windfall. As such it must be paid into the Arrangement for the benefit of your creditors.

Unless the payment is very large in comparison to your original debt the length of the Agreement will not reduce. You will still have to keep up your normal monthly payments. The amount repaid to your creditors simply increases overall.

In most cases the bank in question will pay the cash directly to your IVA company. If you receive it personally for any reason you cannot keep it. It must be forwarded on to them.

PPI Compensation normally includes a certain amount of interest. Most IVA Companies will let you keep this element of the claim as an incentive for co-operating with them.

Can you claim for PPI against debts not included in your IVA?

You may have had loans or other debts which you paid off before starting your IVA. In addition you could have existing accounts which are not included such as your mortgage or a secured loan or HP agreement.

If you claim against these accounts you might think you will be able to keep any PPI compensation you receive. Unfortunately this is not the case.

Even though these debts are not included in the Arrangement any compensation paid to you in relation to them is still a windfall. As such you will have to tell your IP and hand it over.

Do not try to hide PPI compensation you receive during your IVA. Your IP will usually become aware of the payment during your next annual review. They will then demand that you hand it over at that time.

What if you make PPI Claims after your IVA has finished?

You might consider delaying your PPI compensation claims until after your IVA is completed. This would seem sensible as generally speaking you can keep any windfalls received after your completion certificate has been issued.

With most type of windfall this is the case. If you receive a lottery win, bonus from work or an inheritance after the Arrangement has ended this money is yours to keep.

However PPI compensation is not treated in the same way. In March 2017 the Court of Appeal ruled in a case known as Green v Wright that in most cases this type of windfall is still payable into an IVA even after it is completed.

The Green v Wright ruling does not apply in all circumstances. It may still be possible for you to make PPI claims after an IVA and keep the money. However you must first get written confirmation from your old IVA Company that they have no further interest in any compensation payable.

Related Articles

8 thoughts on “PPI Compensation during an IVA

    Jayne gibson says:

    Hello
    I have an iva. It will be three years in October another 3 years to go. When I took it out they insisted I used ppi company to claim some money back. I thought the money from that would go to my creditors to pay off my iva early. This hasn’t happened I am still paying my monthly amount and the ppi amount was in excess of £12.000 my original debt was £12.600 which was written off to £3.600

    What puzzled me is the ppi company sent me £ 2.000 through the iva company. Surly this should of gone through to pay off my iva? Am confused I just want to pay it off surly there is something not quiet right here.
    Hope you can help thanks.

    Hope you can advice thanks

      Hi Jayne

      It is common for your IVA Company to insist on you applying for PPI during the Arrangement. Any compensation paid is regarded as a windfall and must therefore be paid into the agreement. The fact that this happens does not necessarily mean that the arrangement is then settled early. This would only happen if the amount received was large enough to pay off 100% of the original debt (in your case £12,600 less any payments already made) plus the IVA Company fees plus interest charged at 8% per year on the total debt you owed from the start date. In your circumstances the amount paid must not have been large enough to cover all of those amounts and so your monthly payments have to continue.

      In terms of the £2000 you received. This was probably the interest paid by the bank. This forms part of your PPI compensation. Most IVA companies allow you to keep this element. Given you still have this money you might now be able to do a deal with your IVA company to settle the arrangement early. They might take the £2000 in full settlement meaning you do not have to make any further monthly payments. Why not discuss this with them and see what they say.

    Paul says:

    I persued a PPI claim not knowing it was in breach of iva. Now i have a cheque for 5 grand. What do i do?

      Hi Paul

      I assume from what you have said that you started a claim for PPI during your IVA yourself and have now received compensation of £5000. If this is the case then as highlightd in the article above the compensation you have received is a windfall. You must inform your IVA company about it and you will have to hand over the money to them. This will be added to the amount paid into your IVA. It will not reduce the length of the arrangement at all.

      You may consider not telling your IVA company you have received this money. However if they find out (perhaps by reviewing your bank statements at your next annual review) they will ask you for the money then. If you no longer have it then you will be in breach of your IVA and it could fail. As such I strongly recommend you tell your IVA company.

    bethika says:

    my iva finished in May 19 and im still waiting for completion, today I got a letter saying lloys bank are going to pay back 15k as a result of ppi issues, of which 10k is interest paid back for years of not being able o use my money, will this 10k be paid back to me?

      Hi Bethika

      I would say you have very little chance of getting this money.

      Until you receive your complete certificate your IVA is still active (even if you have finished your monthly payments). If you are awarded PPI during this period, the cash must be treated as a windfall and paid into your IVA. As such you are still legally bound to info your IVA company of this payment.

      Even if you had already received your completion certificate you would still be unlikely to be able to keep the money. Most banks will not normally pay out PPI compensation to you. As per the Green v Wright ruling (see the above article), they are likely to pay out to your IVA company anyway.

    James Crabb says:

    Hi.
    My IVA failed in 2019. During which, my IP claimed £6500 in missold PPi. How do I know if this has been paid into the arrangement? Thanks

      Hi James

      When your IVA failed, you should have received written confirmation of this from your IVA company. With this letter, they would have attached a breakdown of all the money they received from you while your were in the arrangement and what they did with the funds.

      Reviewing this document is the only way you will be able to find out what funds were paid into your IVA and what happened to them. If any PPI was received, this should be listed. If you don’t have a copy, you will need to contact your old IVA company and ask them to resend a copy to you.

Leave a Reply

Your email address will not be published. Required fields are marked *