Benefits overpayments – Are they included in an IVA

Benefits overpayments including housing benefit, universal credit and tax credits can all be included in an IVA. They are treated the same way as any other unsecured debt you owe.

Included in this article:

• Which benefits overpayments can be added to an IVA?
• Will you still get your ongoing benefits?
• What happens to joint benefits overpayments?
• Is it better to go bankrupt?

Which benefits overpayments can be added to an IVA?

Any benefit overpayments can be included in an IVA. Whether or not you have been overpaid housing benefit, Universal Credit, tax credits or other benefits, the debt owed can go into the Arrangement.

Basically, they are treated in the same way as any other debt you owe.

Once the IVA is agreed, all your creditors including the benefits agencies are legally bound. This means that while the Arrangement is in place, they are not allowed to take any more action against you to collect their debt.

In addition, any enforcement action currently underway must stop. So if you have already agreed a repayment plan you will be able to stop paying this. If bailiffs have been instructed to collect the outstanding amount, their actions must cease.

Any debts that remain unpaid at the end of the your IVA are legally written off. The creditors are not allowed to come back to you and try to collect the balance.

Will you still get your ongoing benefits?

If you include benefit overpayments in an IVA, you don’t need to worry about your ongoing payments. These will continue to be paid to you as normal. You will still get your full benefit entitlements.

Once your IVA has started, the benefits agencies are not allowed to claw back any more money you owe them by reducing the amount they pay you in the future.

If your payments have already been reduced because over overpayments, the reductions should stop. You should receive your full entitlement from the start date of the IVA, although this might take 2-3 months to sort out.

When preparing your IVA income and expenses budget, you should include your full benefit entitlement in your income figures.

Benefits payments are included as part of your income in an IVA. They can be used to support your monthly payment.

What happens to joint benefits overpayments in an IVA?

You need to be careful if your benefits overpayment debt is in joint names with someone else (usually your spouse or partner).

If you include it in your IVA, the other person is not protected. They are still liable to pay the whole debt.

So how do you get around this?

Where they are unable to pay the debt themselves, the answer could be a joint IVA. This is where you both start an Arrangement at the same time. You are then both protected from the joint debt.

You can use a joint IVA whether or not the other party has additional debt. If they do this is also be included in their Arrangement

Before starting a joint IVA, think about the total amount of debt the other person owes. If it is relatively small, an alternative debt solution might be better suited for them.

Is it better to go bankrupt if you have benefits overpayments?

An IVA is not always the best solution to use if you have benefits overpayments. Depending on your circumstances, going bankrupt might also be a sensible option.

This is particularly the case if you are renting where you live (ie you are not a home owner), and your only income is benefits. This is because in bankruptcy, you will not have to make any further payments towards your debts if your income is only made up of benefits.

In these circumstances, all the debts you have including any overpayments will be written off. Your bankruptcy will last for 12 months and you will be debt free.

If you are already on a low income, not having the burden of having to make monthly payments for the next 5 years (as would be required in an IVA) is a huge advantage.

Struggling with benefit overpayments and need more advice? Give us a call (0800 011 4712) or complete the form below. It’s free and confidential.