A MAJOR shake-up to debt rules could help those struggling within the cost of living crisis to obtain extra help and cut your loan payments.
People with an Iva (IVA) might get their debt reduced if they can't cope with repayments.
The Insolvency Service has issued new guidance, encouraging IVA firms to assist clients by reducing their repayments.
What is definitely an IVA?
An IVA is an arrangement between you and your creditors, which is approved in the court, to pay back the money you owe over an agreed period of time.
When you're on an IVA, creditors should not chasing you to definitely pay your debts or charge interest on what your debt.
You'll usually pay an agreed single payment per month, though sometimes it's a lump sum.
When with an IVA you have to enable your creditor determine if your earnings increases and you can't take out any new credit without permission.
An IVA is set up by an insolvency practitioner, which will charge you a charge for the service.
It can include a range of debts such as energy bills, council tax arrears, store cards, overdrafts, loans and more.
What is changing?
Usually, IVA firms can help to eliminate your monthly debt repayments by up to 15% if you're can not cope.
Firms offer these reductions where those who work in debt can't afford their repayments and also the IVA reaches risk of failing.
The reduction helps ensure the person indebted could make repayments in a sustainable level.
But there are fears more IVAs could fail as the living costs crisis ramps up, and households can not cope with soaring costs of essentials.
Debt charity StepChange said: "The increasing living costs has grown the danger that IVAs could fail if people can no longer afford the payments.
"If the IVA fails before completion this can prove expensive for people and take away the protections they received underneath the IVA, so this is a situation that should be avoided so far as possible."
The Insolvency Service has issued new guidance to IVA firms, allowing them to reduce payments by up to 50% where required.
However, it's worth considering, that whenever an IVA firm reduces your instalments, many times, it extends the arrangement to create up for this.
The guidance, however, states that any extension should not be a more than a year, and it shouldn't extend to IVA to a total of more than seven years.
Sara Williams of debt help website Debt Camel, said: "This new guidance can help a lot of people who're currently struggling to pay their IVAs and wondering the way they will be able to manage in the autumn when energy bills go up yet again.
"Some people may be able to get considerably lower payments, and others who are only making low payments at the moment, may be helped if their IVA firm agrees to their IVA being completed without one having to make any further payments."
Can I recieve a reduction?
To be looked at for a reduction, you'll have to ask your IVA firm for any review – these are usually done annually however, you can ask for one sooner.
How much of a reduction you qualify for will depend on your own situation.
If you are eligible for a reduction, your IVA firm will explain the situation for your creditors, that will vote on whether or not to approve a decline in repayments.
Where it appears as if an IVA may fail, the guidance said that firms should think about whether an IVA ought to be settled "on the basis of funds paid to date".
This indicates if your creditors agree, your IVA completes without you making anymore payments.
StepChange added: "The new guidance should imply that more and more people can complete their IVA rather than see it fail.
"This can be a very welcome and pragmatic rise in light from the living costs crisis."
The Sun has approached the Insolvency Service for comment.
What are my other options?
An IVA might not be the very best route for you if you're indebted, so it's usually a good idea to seek advice prior to making any decisions.
One choice is Breathing Space, a scheme that gets you extra time to get on top of your finances.
Under the government-backed scheme, you could get 60 days of breathing space where your creditors cannot contact you, take action to make you pay, or add interest and expenses to your debt.
Organisations for example Citizens' Advice and StepChange can offer free, impartial advice if you're experiencing debt.
We've put together a full listing of places you can get free debt help.
You could also contact your local council to find out what support is available where you live and if you qualify.
We spoke to 1 savvy saver who managed to clear almost lb13,700 indebted by overhauling his spending habits.
And another shopper racked up lb40,000 of credit card debt but were able to pay everything off.