If you can’t afford to pay your IVA because the payments are too high, you have various options. It is often possible to reduce the payment amount or perhaps take a payment break. Alternatively you could stop paying the IVA altogether.
Included in this article:
- Can you reduce your IVA payments?
- What are the implications if your payments go down?
- Should you take a payment break instead?
- Can you cancel your IVA?
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Can you reduce your IVA payments if they are too high?
Your IVA payments may be too high because your living costs have increased. Alternatively, your income may have fallen or you are suffering a combination of both. In these circumstances, it is often possible to reduce what you pay.
First you need to speak to your IVA company and explain the problem. You will have to give them a new income and expenses budget. This should show any changes to your figures and how the amount you can afford to pay has changed.
If they agree with the changes, they may be able to reduce your payments by up to 50% of the current amount.
It will only be possible to reduce your payments, if your IVA is still sustainable. Bear in mind that the standard minimum payment amount for an IVA is £100/mth.
You are unlikely get a reduction if your payments would fall much below £100/mth. If the amount you can pay is now just £50/mth or less, it is likely that your IVA is no longer sustainable and can’t continue.
You should expect your IVA company to ask for proof of any change to your income or expenses. They may ask you to provide wage slips, bank statements and or utility bills.
What are the implications if your payments go down?
Where your IVA company does agree to reduce your payments, you will have to compensate your creditors. Usually this will be in the form of an extension to your IVA.
As standard, 1 extra year (12 months) of payments will be added to the Arrangement after a reduction. However, this could be extended to 2 years if your payments were already relatively low or have had to fall by a significant amount.
If you don’t want to accept the extension, you don’t have to. However your payments will have to remain at the current level.
Given they are already two high and you can’t afford them, doing nothing isn’t really an option. As such, if you want to carry on with the IVA, there is nothing you can do other than accept the extension.
You also have the option of cancelling your IVA and dealing with your debt in a different way. You can find out more about this option later in this article.
Should you take a payment break instead?
Asking for a reduction in your payments may not always be necessary. It depends on why they are are too high. You need to think about whether the problem is permanent or just temporary.
If things are likely to return to normal again in a few months, then the problem is temporary. Once the problem has passed, you should be able to go back to making your normal payments again.
In these circumstances, you should ask your IVA company for a payment break. You are allowed to take up to 9 months of payment breaks where your payments will be suspended. The ones you miss are then added to the end of the Arrangement.
The current increases in the cost of living such as rises in the price of energy and petrol are unlikely to be temporary. It is more likely that they are here to stay. If you can’t pay your IVA for these reasons, a payment break will not work for you.
Can you cancel your IVA?
You may find you simply can’t afford to continue paying the minimum payment required by your IVA company. Alternatively, you may not want to extend the number of payments in return for reducing them.
In these circumstances, you have the option to stop paying your IVA and cancel it. You are allowed to do this at any time during the agreement. Your IVA company can’t stop you.
However, if you cancel you will still be responsible for paying most (if not all) of the debt you started with. This is because some (and possibly all) of the money you paid into the agreement will be taken by your IVA company to pay their fees.
You therefore need to have a plan ready for how you will manage what you owe going forward.
If you are not a home owner, a sensible solution to consider will be to go bankrupt. It sounds scary, but it might actually be great option because you won’t have to make any further payments towards your debt at all if you can’t afford to. If you are a homeowner, bankruptcy might have to be avoided and a debt management plan is likely to be a better option.
Can’t afford to pay your IVA and need help? Call us (0800 011 4712) or complete the form below. The advice is free and confidential.