Could you pay back more than you owe in an IVA

Could you pay back more than you owe in an IVA

An IVA will often help you write off debt. However in some circumstances you will pay back most or all of the debt you owe and perhaps even end up paying more.

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What is the maximum amount you could pay back in an IVA?

It is certainly possible that you could end up paying more into your IVA then you originally thought. This is because IVA payments are not fixed.

You may not be aware of this, but the amount you pay will usually increase if your income goes up (or your living expenses fall). You will also have to pay more if you get a windfall.

However this does not mean the Arrangement will be completed any faster. Normally there will be a clause in the agreement which confirms that where increases in your payments allow, you must continue paying until you have paid back 100% of the debt you originally owed.

But that’s not all. The clause will also state that where possible you must pay the IVA company’s fees and costs. In some IVAs it may also say you have to pay interest on the total original debt of 8% per year.

The result of this, you could end up paying back £1000s more than you originally owed.

It is rare that your circumstances will improve so much during your IVA that you pay back more than you originally owed. But it is possible.

What can you do if you are unhappy?

So what can you do if your payments have increased and this means you will pay back more than you originally owed?

In these circumstances, you should first see if there is anything your IVA company can do to help. If not, you have the option of cancelling your Arrangement. Although it’s legally binding on your creditors, you can stop paying and tell the company to terminate the Arrangement at any time.

After the agreement cancelled, you will still be liable to repay any debt you still owe to your creditors. You therefore need to have a plan in place for how you will do this.

Generally you will need to consider either a debt management plan or – depending on your circumstances – going bankrupt.

When you cancel, your IVA company can take fees they are owed out any payments you have already made. This means your original debt may not have reduced by much (if anything at all).

Don’t stop paying your IVA before taking advise from us. Call 0800 011 4712 or complete the form below. Its free and confidential.

Is an IVA a good solution if you know your income will go up?

No-one can predict the future. But if you know you are likely to get a significant increase in your income (or a windfall) over the next 5 years, an IVA might not be right for you.

Before starting the Arrangement, think about how much your payments will go up if your circumstances do improve as you predict. If such an increase means you will end up paying back more than you currently owe, the solution may not be right for you. You should then seriously consider the alternative options.

The risk of paying back more than you owe significantly increases if your total debt is relatively low.

For example, if you owe £6000 and your payments start at £80/mth, you will be expecting to repay £4800. But it does not take much of an increase in your income for your payments go up by just £20/mth. If this happens from year 2 onwards, you will end up repaying almost all your total debt.

If your payments increase again in subsequent years (which is certainly possible), you will pay more than you originally owed.

Struggling with increased payments during an IVA? Give us a call (0800 011 4712) or complete the form below. The advice is free and confidential.

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