Insolvency & Coronavirus – What to Do If You Can’t Afford to Pay

Struggling to meet your IVA or Trust Deed repayment as a result of the pandemic? Here’s what to do.

Across the UK, protected trust deeds, IVAs, Debt Arrangement Schemes and more are helping thousands of people out of debt. But as the coronavirus outbreak makes repayments more difficult, what can you do if you find yourself struggling to make your next payment?

The first rule of seeking help

There’s a common theme running through all of the attached guidance, and that is to be open, honest and upfront about your situation – and to talk to your advisor or insolvency practitioner (IP) before you miss payments, not afterwards.

That is the advice for anyone, anytime. The fact that coronavirus has placed many more people into difficulty doesn’t change the need to communicate. Unless you are told otherwise, do not assume that your provider will simply ignore a missed payment. They almost certainly won’t, even in these difficult times.

They are, however, very likely to offer help if you talk to them asap.

Protected Scottish Trust Deed

Talk to your IP and explain your situation. They are likely to want to carry out a quick review of your finances before they agree to any change of arrangements, but assuming the review confirms you are unable to make your current payments they are likely to offer:

• A short payment break; or
• Arrange a reduced payment for the duration of the outbreak

At worst, the deferral might result in your trust deed being extended for a short period beyond the original end date. At best, there may be no change at all.

Debt Payment Programme/Debt Arrangement Scheme

Your advisor should be able to give you a crisis break of at least one month and, in the current circumstances, possibly longer. There are limits to the number of crisis breaks you can request in any one year – currently the number is two – but you should speak to your advisor about possible help, even if you have already had two breaks.

If you can’t get in touch with your advisor, the Accountant in Bankruptcy has issued emergency information.

IVAs

Most IVAs will be agreed with provision for a payment break or a reduction in monthly payments. If yours was set up in this way, arranging help over the outbreak should be relatively simple.

If your IVA wasn’t set up with such a provision, your IP will need to arrange a meeting of your creditors to vary the agreement so that temporary measures can be put in place. This may not be difficult in theory, but the challenge of contacting creditors in the current climate together with the sheer volume of requests may mean there is some delay in reaching a decision.

Debt Management Plans

Again, postponement or reduction of payments is a possibility and we know a number of providers are committing not to close plans as a result of missed payments during the outbreak. It remains important to call your provider, though, rather than simply assuming you’ll be allowed to miss a payment.

Other points to remember

Your IP or advisor will probably want to see evidence of your reduction in income, so it’s worth putting that together now.

Whilst coronavirus is making life difficult for very many people, others are seeing an increase in income because of the specific work they do. If your income has been unaffected or even improved by the crisis, it’s important you keep making your payments and inform your advisor or IP of any increase in earnings.

Contacting your Insolvency Practitioner or advisor

As you might expect, debt management services are under a lot of pressure right now. Call volumes are increasing as advisors are forced to work from home and, increasingly, fall sick themselves. If you believe you’ll need help, therefore, don’t leave it until the last minute.

If you need to find the right debt solution to help you ride out the coronavirus outbreak, see our guidance here, or contact us.