Can you add a debt to your IVA

Can you add a debt to your IVA

It may be possible to add debt to your existing IVA. However your IVA company will need to agree. The length of the Agreement will also normally be increased.

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Can you add a forgotten debt to an existing IVA?

Only debts listed in your IVA proposal are included in the Arrangement. If you forget to include one or were unaware of it at the time you applied, you remain liable to pay it. 

You can’t just ignore the debt. The creditor can hassle you for payment, apply for a CCJ against you and even an attachment of earnings or appoint a bailiff. So what can you do?

You must speak to your IVA company as soon as possible. If the amount is no more then 10% of the total already included in your Arrangement, they should be able to add it. In return, you will probably have to agree to extend your payments for at least an extra 12 months.

If the amount you want to add is is larger than 10% of the existing debt, the creditors will have to agree to the change. This shouldn’t be anything to worry about. Normally they will agree as long as the Arrangement is extended.

What about adding a new debt to your IVA?

What happens if you get into more debt during your IVA? Perhaps you fall behind with your council tax or utility bills. Alternatively you might have borrowed from a payday lender to fund a financial emergency.

It is very unlikely that you will be able to repay both the new debt and keep up with your IVA payments.

Again, in this situation, you should speak to your IVA company as soon as possible and explain the situation. They will probably be unhappy that you have got into more debt. But equally they will not want the Arrangement to fail. This would mean that they loose money

As with forgotten debt, your IVA company has the option of simply adding any new balance which is less than 10% of the amount already in the Arrangement. If the amount is greater than 10% they will have to get acceptance from the creditors. 

If you want to add debt because you have fallen behind with council tax or utility bills, you should also review your expenses budget. Make sure you have a sufficient allowances to maintain the payments on time from now on.

Is taking a payment break a better option?

Instead of trying to add debt to your IVA, you might be better off paying it by using a payment break. This means your normal payments are put on hold. Instead, you use the money to repay the new debt.  Once it’s paid, you restart your IVA.

The payments you miss are added to the end of the Arrangement.

The problem with this option, is it can only work if the amount you save by stopping your payments is enough to repay the new debt in a reasonable time.

Normally you can only miss up to 9 months payments during your whole IVA. If this doesn’t give you enough time to pay your debt or you have already used some, it won’t work.

You can’t just decide to take a payment break. You have to get agreement from your IVA company first. 

What if your IVA company won’t help you?

You can’t add a debt to your IVA without the agreement of your IVA company. So what if you have asked them but they won’t help or the terms they are offering just aren’t acceptable? 

In these circumstances you could cancel the Agreement and do something else.

The first option you can consider is cancel and then start a new IVA with a different company. The new Arrangement would include both your original and any new debt. The downside with this however is that you will be facing another 5-6 years of payments. 

Alternatively you could cancel and then switch to a different more suitable solution. The option that many people consider is going bankrupt.

The huge advantage of bankruptcy over starting a new IVA is that if your surplus income is very low, you don’t actually have to make any more monthly payments at all. The whole thing lasts just 1 year. If you can still afford to make a payment towards your debt, you will only have to for 3 years.

Of course going bankrupt is not suitable for everyone. But if you’re not a home owner, you’re likely to have nothing to lose.

Got into more debt during your IVA and need help? Give us a call (0800 011 4712) or complete the form below. The advice is free and confidential.