Annual Review of your IVA

Annual Review of your IVA

An insolvency practitioner has to complete an Annual Review of your IVA. What happens and what information will you have to provide?

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Why do you need an Annual Review?

Your insolvency practitioner (IP) has a duty to review your financial circumstances every year you remain in your IVA. They need to check to see if your income has increased or any of your living expenses have fallen. This is known as the annual review.

If your circumstances have improved then your ongoing payments could rise. However this will only ever happen if your disposable income has increased.

The review will look again at your income and expenses budget. As such it will also take into account any legitimate increases to your living expenses as well as increases in income. For example increased travel costs as a result of a pay rise. You will not be asked to change your payments if overall your financial situation has remained the same.

You will have to carry out a final review of your circumstances after you make your last IVA payment. If you have earned more in the previous 12 months you might have to pay extra before your completion certificate can be issued.

What do you have to do for the Annual Review?

Like at the start of the IVA, at each annual review you will have to provide documents supporting your income and expenses. Usually these will include payslips and bank statements. Some IVA companies will only ask for the last 3 months. However others will require the full 12 months.

If you are self employed you will normally have to provide a schedule confirming your business revenue and expenses during the last 12 months. This may also have to be backed up with bank statements.

If you feel any of your living expenses have increased you will need to provide evidence of this. For example if your child care costs have risen you need to provide receipts for the extra bills.

If your income or expenses change, don’t wait for your annual review to tell your IVA company. If you wait and your payments need to increase you will get into arrears and might face a bill at the end of the year.

What if your living expenses have changed?

Just because you are earning more does not mean your IVA payment will automatically increase. Often a change in income will come with associated increases in your living expenses. As a result your disposable income may remain the same.

You may have got a new job which pays more but now have to travel further. As a result your transport expenditure will increase. If you have just started work but now have to pay for child care this expenditure will normally be significant. You must remember to increase these expenses in the new income and expenditure budget you submit to your IP.

For this reason your Annual Review is a good way of making sure your budget reflects what is really going on. If you do it properly you will still be in a position where you can afford any changes to your payments.

Only specific expenditure increases can be considered at your annual review. Your IVA company will not usually allow increases because the cost of living has “risen in general”.

My IVA has become unaffordable, what now?

If your income has fallen or specific expenditures increased you may no longer be able to afford your IVA payment. Perhaps the overtime you were used to has been cancelled or your mortgage payments have gone up.

In these circumstances it may be possible to reduce what you are paying into your Arrangement. Small reductions in your monthly IVA payment are possible without asking the creditors. Your IP can authorise up to a 15% reduction in your monthly payment. Anything more than this would have to be requested by applying to the creditors for a ‘variation’.

It is not always possible to reduce your IVA payments. The amount you can afford to pay still has to be sufficient to sustain a sensible repayment to your creditors. If you cannot do this there may be no alternative than to let your IVA fail and consider an alternative solution.

Where your IVA payments are reduced you will have to compensate your creditors. Normally the Agreement will be extended for an extra 12 months (although this could be longer).

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6 thoughts on “Annual Review of your IVA

    Michael De Souza says:

    My last payment of our iva was paid 1st August for a month none got in touch with us so we rang aperture about our completion certificate they told us they could only start it once we had sent documents for them to do a final review then they could start doing the completion certificate is this normal practice or not

      Hi Michael

      It is perfectly normal for your IVA company to complete a last review of your circumstances after you make your last payment. It is usually 12 months since your last review and so they need to check to make sure your income remained the same in the last year.

      If your income and expenses remained the same there is nothing to worry about. If you earned more (perhaps due to a pay rise, overtime or a bonus) then as per the terms of your Arrangement you will need to pay a little extra into the Arrangement before it can be completed and your certificate issued.

      You should send them the documents they are asking for asap. The sooner the final review is done the sooner the IVA can be completed.

    Will says:

    Hi

    I need to know if our annual increase is correct. We have both previously advised that bonus and overtime payments are not guaranteed and going forward if we were to accept the increase in our monthly payments as a result of these bonus’s and overtime payments we may end up paying twice.

    The amount that we are allowed to earn is XYZ plus 10% then we pay 50% of any balance. This 50% has now as it did last year been added to our monthly payment. Why has our monthly payment increased?

    We feel that going forward with these increases again this year we will be paying twice on the 50% additional contribution. Once in the increase amount monthly payment and then again when we call them to calculate it.

    I am not sure if this correct? Any advise you may give would be greatly received as we have always in the last four years kept up to date as required.

      Hi Will

      Standard IVA terms and conditions state that you can earn up to 10% of your normal take home pay in any particular month due to overtime or a bonus and keep the money. If you earn any more than this half of the extra must be paid into your IVA. If this happens it should not result in a permanent increase in your normal IVA payment. By its nature an overtime or bonus payment is not permanent or guaranteed each month.

      That said, people often forget to tell their IVA company immediately that they have been paid overtime or a bonus. As a result the extra income is only discovered at the annual review when bank statements and wage slips are reviewed. If a number of extra payments have not been disclosed it can add up to quite a sum.

      This is not an issue if you have saved the money. You should then simply be able to pay everything you owe and move onto the next year of your IVA. Your normal monthly payment will not change (given nothing else has changed). However if the cash is not available because it has been spent (which is often the case) then the only way it can be collected by the IVA company is to increase the ongoing monthly payments.

      Given what you have said I can only assume this is what has happened in your case. The way to avoid the problem in future is to tell your IVA company immediately every month you earn extra so what you owe can be paid there and then. Alternatively save the 50% you know you will have to pay so it can be handed over at the next annual review without the need to increase your ongoing payments.

    Jo says:

    My partner is in month 52 of an Iva, I’m not in the Iva but we have a joint mortgage. My income is included in the income/expenditure. None of the debts in the Iva are mine but all the disposable income goes into the Iva. I’ve read quite a few of your comments/answers so am asking if this is correct as I got the impression that only 50% of the disposable income should be paid into the Iva as I’m entitled to some of the disposable income?

    Also we have just gone through the month 54 re-mortgage that resulted in no enquiry release so it’s the extended 12 months clause instead. I just want to make sure the monthly payments are being calculated correctly for the remainder of the Iva?

    Also, if my income increases do I need to keep the Iva company informed? The annual review is due around July but wasn’t sure if I needed to update my income details before. My partners income remains unchanged at the moment but will have his tax assessment etc in time for the review

      Hi Jo

      Different IVA companies have different policies on splitting disposable income. If your IVA was agreed on the basis of the total of the household disposable income being paid into the agreement then I am afraid this is what you will have to stick with. You can’t change the agreement half way through.

      Our policy here has always been that if there are two earner’s then it is only fair to split the household disposable income. The person starting the IVA pays their share into the arrangement. The other person keeps their share for whatever then want to spend it on. Most creditors are happy with this. Of course where both parties are using a joint IVA the full disposable income has to be paid in.

      In terms of your income increasing Jo, again whether you are obliged to inform your husband’s IVA company about this depends on the terms of the IVA. That said it is difficult to see a scenario where you would have to inform them about changes to your income given you are not legally party to the IVA.

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