An IVA will normally last for 5 years with 60 monthly payments. However it is possible for the agreement to be extended in certain circumstances.
Included in this article:
- Creditors can demand a six year IVA
- Taking payment break will mean your IVA lasts longer
- What if your monthly payment is reduced
- IVA extended if home equity cannot be released
Creditors may demand a six year IVA
Traditionally a monthly payment IVA will last for 5 years. Most IVA companies will put forward a proposal based on the standard of 60 monthly payments.
However, creditors do not have to accept this. It is becoming increasingly common for them to demand the length to be extended to 6 years (72 months).
You should expect a 6 year IVA if the monthly payments you propose are relatively low. So it is common to see 6 year IVAs where the payments are £100/mth or less.
You will read and may be told that your IVA will last 5 years. However you need to be prepared to accept 6 if your creditors demand this.
Taking a payment break will mean your IVA lasts longer
It is possible to take a pre-agreed break from your payments during your IVA. This can be really useful if your income falls temporarily because for example, you go on maternity leave or lose your job.
Most standard (Protocol compliant) IVAs allow up to 9 months of payments breaks. However if and when these are taken, they must be made up.
Generally speaking, payments missed due to agreed payment breaks are added to the end of the agreement. The result is that the IVA is extended for the equivalent number of months that were missed.
Monthly payments added to the end of an IVA are based on the last standard payment amount even if this is higher than the missed payments would have been.
How long will your IVA last if your monthly payment is reduced?
Your circumstances may change during your IVA. Your income may fall or your expenses increase for some reason. As a result you may need to reduce your agreement payment.
To make this kind of change, your IVA company normally has to get formal agreement from your creditors. This is known as getting a variation.
If the reasons for the reduction are justified, the creditors will often agree. However, they will expect to be compensated for this. As standard you will be required to add an extra 12 – 24 months of payments to the end of the agreement.
If you get agreement to payments are reduced, you must expect that your IVA will then last for an extra 1-2 years.
IVA will be extended if home equity can’t be released
If you are a home owner, you will have to agree to a so called equity release clause. As such, in the 5th year of your IVA you must attempt to release equity from your property and pay this into the Arrangement.
Where it is impossible to release equity from your property (perhaps because you can’t re-mortgage), your IVA will be extended for an extra 12 months instead.
As a result, the agreement will last for an extra year. However most people actually prefer this option over having to re-mortgage their property and give up equity.
We can help you understand how long your IVA will last. Give us a call (0800 011 4712) or complete the form below.