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.

Struggling to get your head round this? We can help. Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

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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6 thoughts on “Could you pay back more than you owe in an IVA

    Dawn J says:

    I am already in an Iva with creditfix. I pay 447 pm and my total debt was 12000 including fees.
    I am expected to have paid 26000 by the time my Iva ends surly this is not right.
    Please can you advise

      Hi Dawn

      From what you have said, an IVA is not a suitable solution for you. It looks like paying £447/mth will mean that during the course of your IVA you will pay back far more than you originally owed. This is a crazy situation.

      Depending how long you have been in the arrangement, my advice would be to cancel and pay your outstanding debt off yourself – probably with a debt management plan. This would seem a far less expensive option.

      By all means give me a call if you want to discuss your situation in more detail (0800 011 4172). In the mean time you can read more about how to cancel your IVA here: Cancel IVA if not happy

    Luket says:

    My origanl debt was £15000 but repayments was only £150 I had a payrise 6 months into it and am now paying £358 a month iv now paid back all 15000 iva are still taking money off me

      Hi Luket

      Where your payments increase sufficiently during your IVA, it is possible that you can end up paying back more than you originally owed.

      Although this was probably not pointed out to you, the terms and conditions you signed up to at the beginning will have stated that where possible you keep paying until 100% of your total debt is paid + all IVA company fees (and possibly interest).

      Normally the fees and charges over a 5 years IVA will be around £3500 so I think you will be facing repaying at least £18-19k

      Your options now depend largely on how many more months you have left on your IVA.

      From what you said I think you might have around 15 months left to go. This would mean paying another £5000. Given this, I think it would be sensible to consider whether you might be better off cancelling your IVA. However if you do this, you will still be left with some debt to pay so you need to be careful.

    David K says:

    I’m already in a IVA and I’m about to enter my final year. I will be being made redundant soon and informed them. My debt was just over £16000 and I have paid just over £9500 back. I understand I can keep upto 6 months of pay from my redundancy to pay my living cost. They have said should I get employment before the 6 months they will want what’s left.

    My issue is they said I will have approximately £4000 wrote off. If they take my redundancy and any other money coming to me I would off paid more than I original debt. Is there anyway I can stop this such as cancelling my Iva and going straight to my creditors to set up a payment plan? I have given my details to you guys for a call back to discuss this but was just reaching out to relieve my nerves. Thank you

      Hi David

      From what you have said, if you stay in your IVA, there is a strong possibility that you will end up repaying more than you originally owed. Clearly that would not make sense.

      If you feel that this will be the case, you have the option of cancelling your IVA. If you make that decision, then you would not have to pay any of your redundancy money to your IVA company. You retain 100% of the funds.

      Remember, if you cancel your IVA, not all of the money you have paid into it will go towards repaying your debt. Your IVA company will retain a sizable amount to pay their fees.

      Once your IVA is cancelled (which will take around 3-6 months) you can then put a debt management plan payment plan in place to manage your remaining debts. You could also consider using some of your redundancy money to make settlement offers to one or more of your creditors.

      You can read more about how to cancel your IVA by clicking on this link: Cancel your IVA if not happy

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