Cost of living pay rise during an IVA

Cost of living pay rise during an IVA

You must tell your IVA company if you get a pay rise during your IVA whatever the reason. Your payments may then increase as a result.

Included in this article:

Already in an IVA and need help?

Give us a call: 0800 011 4712 or complete the form below to speak to one of our experts

Do you have to tell your IVA company about a cost of living pay rise?

You do have to tell your IVA company if you get a cost of living pay rise.

This is the case even if the the extra money you are getting is specifically to off set increases in your living costs.

The terms and conditions of your agreement will state that you have to report all increases in your income. If you don’t, you could be in breach. In serious cases, this might lead to the whole Arrangement being cancelled.

You can’t hide your pay rise.

Your IVA company will find out when you do your annual review. You will have to provide copies of your wage slips and, very often, bank statements at that time. These will confirm your income has changed.

Don’t wait until your annual review to inform your IVA company of your pay rise. This could mean you get into arrears with your payments.

Will your IVA payments go up after a pay rise?

It is likely that your IVA payments will go up after you get a pay rise. However, the increase is not automatic.

Before making any change, your IVA company should review both your income and any change to your living expenses. They must do this to establish whether there are any legitimate increases in your living expenses.

Where your living expenses have also gone up, some or all of the additional money you now have coming in could be offset. Any resulting increase in your payment will therefore be lower.

Generally speaking, you will only be allowed to add specific increases in your living expenses.

Specific living expenses increases include things like an identifiable increase in your electricity and gas bill. Alternatively, an increase in your mortgage or rental payment.

Your IVA company may be reluctant to allow more general increase in your living expenses in areas such as your food shopping.

Does your IVA get paid off quicker?

It is important to understand that your IVA will NOT be paid off any faster if you get a pay rise. This is because the number of payments you still have to make will remain the same.

If you have 3 years left of your IVA to pay, this will not change.

The fact that your monthly payment has increased simply means that you will end up paying back more of your original debt than you first thought.

Some of the extra money you pay will go towards additional fees charged by your IVA company. The rest will go towards your debts.

After your payments have gone up, you could find yourself in a situation where you face paying more into your IVA than the total debt you originally owed. This situation can occur because the agreement states that where possible you have to pay up to 100% of your original debt plus costs and fees.

Where you are facing this situation, it might be better to cancel your IVA and manage your outstanding debt in a different way. Speak to us and we can advise you on the best course of action.

Want to discuss your options after getting a pay rise during your IVA? Give us a call (0800 011 4712) or complete the form below. The advice is free and confidential.

Related Articles

2 thoughts on “Cost of living pay rise during an IVA

    LynseyH says:

    If I receive a one off payment from my employer for costs of living/working throughout covid – will this be taken from me for my IVA ?

      Hi Lynsey

      Under normal circumstances, a one-off payment like this received while you are in an IVA is treated the same way as a bonus. You keep the first 10% of your normal monthly take home pay and 50% of any additional amount. The other 50% would have to be paid into your Arrangement.

      If you are a key worker and this bonus was paid during the pandemic (20th April 2020 – 31st July 21) then some IVA companies who follow the IVA Protocol would have let you keep 100% of the amount received. You can read more about this by clicking on this link: Coronavirus overtime and bonus rules

      However, if your bonus has only been paid now, I believe it may not be covered by these provisions.

      At the end of the day, the percentage of this money that you will be able to keep will really entirely depend on the attitude of your IVA company. You will will need to speak to them about it.

Leave a Reply

Your email address will not be published. Required fields are marked *