Can my IVA payments go up

Can my IVA payments go up

IVA payments are not fixed. It is actually quite common for them to go up during the Arrangement. As a result, you will end up repaying more of the debt you owe. The IVA itself is not paid off any faster.

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Are your IVA payments likely to go up?

You may think that your agreed IVA payment is fixed. This is not true. Your payments can go up during the Arrangement. This will usually happen if your income goes up.

When you get a pay rise or a new job with better pay, you can’t just keep the additional money you earn. You have to tell your IVA company. They will review your income and expenses budget. 50% of any resultant increase in your surplus income must be added to your ongoing payment.

You should actually expect your payments to go up during your IVA. It is very common. The Arrangement will last 5-6 years. During this time it is actually pretty likely that your income will increase. It might even happen more than once.

Increasing your IVA payments is legally allowed. The Arrangement does not state you pay a fixed amount over a fixed time. It says (admittedly in the small print) that you agree to increase your payments whenever possible. As a result, you repay as much of the debt you originally owed as you can.

Your IVA payments will also go up if your living expenses fall. However this is less common than an increase due to a change in income.

Will your IVA finish sooner if your payments go up?

No. If your IVA payments go up, this does not mean the Arrangement will be paid off any sooner.

This is because you don’t sign up to repay a fixed amount. You agreed to pay as much back towards your original debt during the course of the IVA as you.

In almost all cases, this means that the number of payments you have to make overall remain the same. If you have 4 years (48 months) left to go after your payment increases, you will still have to pay then all.

The result of the increase is simply that the creditors included in your IVA will get back more of their money.

Some companies will set up an IVA for you with a monthly payment of less than £100/mth. Where this happens, you can be sure that they will be trying to find reasons to increase your payment during the Arrangement.

Generally speaking, £100/mth is the minimum payment for an IVA to be viable. If your payments were to stay lower than this throughout the Plan, it would simply be impossible for the company to survive financially.

Could you end up paying back more than you originally owed?

Yes. This is possible.

The reason is that the Agreement actually states that where possible, you will repay 100% of the debt you originally. But in addition, you have to pay all the IVA company’s fees. These will normally be £2000-£3000 but could be more. In some cases, interest can also be charged.

After your payments go up, you can calculate whether you might be in this situation. You just need to multiplying your new payment with the months left in your IVA.

Paying more back than you originally owed tends to be more common where your original debt was relatively low. For example £6000-£8000. In these circumstances your monthly payment could quite easily rise to a level where you end up repaying more than you originally owed.

If your income is likely to go up significantly during the next 5-6 years, an IVA could mean you have to pay back more than you originally owed. Before going ahead, talk to us about alternative solutions which may be more suitable.

What if you’re unhappy that about your payments going up?

You may not have realised that your payments could go up during an IVA. If they have and you are unhappy, you do have some options.

First, calculate how much you will pay back in total if you stay in your IVA. If the amount is still less than the total debt you originally owed, you are probably best off sticking with the Plan. It might not be what you though you signed up to, but its still a good deal.

If it looks like you will end up paying much more than you originally owed, there may be no point in staying in your IVA. It might be cheaper to cancel and either pay off your debt yourself or switch to bankruptcy. If you go bankrupt, you will only ever have to pay for 3 more years and perhaps less.

You are allowed to cancel your IVA and stop paying if you want. Just remember that some (possibly all) of the money you have already paid in will be taken by your IVA company for their fees. Depending on the level of your payments and the time you have been in the Arrangement, you may still owe pretty much the same amount as when you started.

If your payments have gone up and you are unhappy, you could cancel your IVA. But speak to us first. We can advise on your options and whether its a sensible plan. Call 0800 011 4712 or complete the form below. The advice is free and confidential.

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6 thoughts on “Can my IVA payments go up

    Robert K says:

    My income has gone up since I started my IVA a year ago. They are now saying I will be paying back more than I owe. Can I leave the IVA and if I do will they push for bankruptcy?

      Hi Robert

      If your IVA payments have gone up by such an extent that you will end up paying back more than you originally owed. In this situation it would be crazy to continue with your IVA. You best option is likely to be to cancel and then make an arrangement to pay off your debt yourself direct with your creditors. You are allowed to do this.

      To cancel you first need to stop sending payments to your IVA company. When they contact you, you should explain that your circumstances have changed and you no longer need the IVA.

      You can read more about how to cancel the agreement here: How to cancel your IVA if you’re unhappy

      Generally speaking, your IVA company will not make you bankrupt if you cancel. This would only ever happen if there is a clause written into the agreement stating they must. However, it would be very rare and normally only exists where you owe a large amount to HMRC.

      If you want further advice about cancelling and the implications for you before going ahead, please do give me a call (0800 011 4712). The advice is free and confidential.

    John R says:

    Im with creditfix and because of cost of living bills etc have gone up. They said I can go from 252 per month to 101 per month but will have to extend it between 1 and 2 years. I’m 4 and a half years into it so over a week ago I said I’m not doing that. They still haven’t got back in touch with me so what do I do?

      Hi John

      A reduction in your IVA payments will almost always go hand in hand with an extension of the agreement for 1-2 years or more. This is to compensate the creditors for the money they are losing due to the reduction.

      If you are not prepared to accept this, your IVA company is unlikely to agree to the reduction. If you don’t continue to pay the agreement it could ultimately fail.

      If you are simply unable to accept the extension, then as you are only 6 months away from completion, I would suggest trying your best to maintain your payments for the last few months. Then your IVA will be completed and you can move on.

      If you simply can’t afford to do this, the only alternative to accepting the extension would be to allow the IVA to fail and use a different debt solution to pay off your remaining debt (a debt management plan or going bankrupt if you are not a home owner).

    Eugene C says:

    What happens if I forgot to tell my insolvency company that my income changed a year ago?

      Dear Eugene

      When you say your income changed, I assume you mean that it increased? If this is the case, it means that your IVA is likely to be in arrears.

      When your IVA company find out (probably when they next ask you for a review) they will re-calculate your IVA payment (which is likely to have gone up). They will then back date this to the first month you got your increase.

      Ideally they will ask you to catch up with the arrears by paying a lump sum. If you do not have funds available to make this payment, there are potentially two options.

      1. Increase your payments even more so you pay off the arrears monthly.
      2. Extend the length of your IVA so the missed payments an be paid that way.

      If you can’t (or won’t) agree a way forward, then your IVA company will have no other option that to fail the Arrangement.

      In these circumstances, it is possible that allowing allowing your IVA to fail and then dealing with your debt a different way might be a better option. You can read more about this by clicking on the following link: Options if I can’t pay my IVA

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