Reduce your IVA Payments

Reduce your IVA Payments

You might be able to reduce your IVA payments if they are unaffordable. However it is only possible in certain circumstances.

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Can you Reduce your IVA payments?

An IVA usually involves making a payment every month based on an amount you can afford. However if the agreed figure becomes unaffordable you might be able to reduce it.

You cannot just reduce the payments yourself. The change must be agreed with your IVA Company. You will first need to discuss the problem with them and explain why you are struggling.

You will normally have to submit a new income and expenses budget showing how your disposable income has changed. You may also have to submit wage slips or expenditure receipts to prove the new figures.

Your Insolvency Practitioner (IP) can agree a payment reduction of up to 15% without referring back to your creditors. If a greater reduction is required they will have to request a formal variation.

In what circumstances is reducing your IVA Payments allowed?

A request to reduce your payments will be considered if there has been an identifiable change in your circumstances. In otherwords there must be a definable change to either your income or living expenses.

A reduction might be agreed if your income has fallen due to a change in job or loss of guaranteed overtime. Alternatively specific expenses may have increased such as mortgage payments after an interest rate increase.

You will not normally be allowed to reduce your payments because of general increases in the cost of living. In these circumstances you will have to manage by simply cutting back on your expenditures.

If your IVA payments are already low (£80 a month or less) it may not be possible to reduce them even after a fall in income as the Arrangement would no longer be sustainable.

The Implications of reducing your IVA Payments

Your IVA Company can agree to reduce your payments by less than 10% without getting permission from your creditors. If this happens there are usually no other implications for the Arrangement.

However where a reduction of more than 10% is required your IP must propose a formal variation to your creditors. The acceptance criteria are the same as the original IVA. 75% or more of the creditors who vote on the variation must say yes.

To gain the acceptance of your creditors you will normally have to offer to extend your IVA. As a result the Arrangement will be extended for a further 12 months at the reduced rate.

If a proposed variation to reduce your payments is not agreed they have to stay the same. In these circumstances you may need to consider alternative options.

What if your IVA Payments cannot be Reduced?

You may find yourself in a situation where you are unable to afford your payments but your IVA Compny says they cannot be reduced. In these circumstances you have two options.

The first is to accept the situation. Make make cuts to your living expenses where you can so the payment becomes more affrodable. If it is possible this is often a sensible thing to do.

If you feel you simply cannot continue with the payments the only other option is to allow your Arrangement to fail. You will then have to deal with your debt problem is a different way.

Allowing your IVA to fail is a serious step to take. Do not do this before getting further advice from one of our experts.

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6 thoughts on “Reduce your IVA Payments

    Dan says:

    Hi

    Me and my partner are in an iva since August 2017 but circumstances have changed. They originally used our tax credits to calculate our income. We were getting about £800 a month but now that has reduced to only £240. What can we do? At the moment we pay about £600/mth into the IVA but now that is not possible. Could this be reduced or should we cancel the IVA and go direct to our creditors to pay them reduced payments direct?

      Hi Dan

      My first suggestion is that you speak to your IVA company. It is possible that they might be able to help you reduce the amount you pay into the Arrangement. First of all they will need to review your income and expenditure budget. You mention your tax credits have gone down but is this because your income has gone up in another area? They will need to understand exactly how your disposable income has been impacted.

      If overall your disposable income has fallen by more than 10% your IVA company will take a view on whether it is still feasible for the Arrangement to continue based on this reduction. If so they will need to agree the reduction with your creditors. Bear in mind they are only likely to agree if you also agree to extend the length of the Arrangement for another 12 months.

      I would only suggest cancelling your IVA if the payments cannot be reduced or you do not want to accept an extension. However if you are considering this it is important to understand the implications. Firstly a good chunk of the money you have paid in will be taken by your IVA company to pay their fees. As such your balances may not have reduced that much.

      Secondly if you can now only sustain relatively low payments it might take you a very long time to repay the debt you owe by making payments directly. As such you might want to consider an alternative solution such as bankruptcy. However this is only likely to be suitable if you do not own a property or if you do where there is minimal equity in it.

    Toni says:

    How likely is it that your IVA company would make you bankrupt?

      Hi Toni

      If you are unable to maintain your agreed IVA payments and you cannot reach agreement with your IVA Company to reduce them then your IVA is likely to fail. If this happens they will not normally make you bankrupt. Usually they will simply leave you to manage your debts yourself from then on. One option you could choose is to declare yourself bankrupt if you wish.

      The only circumstances in which you might be made bankrupt after your IVA fails is if one of your creditors has specifically requested that this happens as part of the Agreement. Normally this would only be the case if a significant portion of the debt included in the Arrangement was owed to HMRC.

    Paul says:

    Hi.
    I am looking for information with regards to my IVA I have recently been made redundant, unfortunately I am not in a position to pay my I’VE off in one payment. Is it possible to make a payment equivalent to 2 years of payents to take pressure off my finances until I return to employment.

      Hi Paul,

      If you have been made redundant you need to speak to your IVA company. If you have received any redundancy money this is treated as a windfall and some may have to be paid into your IVA. Your company is also likely to offer you a payment break until you find another job to reduce the pressure on you.

      If a third party can offer a lump sum, then another option might be that you can make an offer to settle your IVA once and for all. Normally the amount offered would have to be the equivalent of all the remaining payments in your agreement. However if your job prospects are poor or uncertain the creditors might accept less.

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