The Government has issued guidance stating key workers do not have to pay overtime into their IVA if earned during the coronavirus pandemic. However, this does not apply to all IVA agreements.
Included in this article:
- Coronavirus overtime rules if you have a Protocol IVA
- The rules if your IVA is not based on the Protocol
- What if you can not pay your IVA
Coronavirus overtime rules if you have a Protocol IVA
Your IVA is based on the terms and conditions which you signed up to when you started the Arrangement. The majority of IVAs use a standard known as the IVA Protocol.
Under normal circumstances, if you are in a Protocol IVA and you earn overtime, up to 50% of this may have to be paid to your IVA company. However in April 20, the Government changed this rule to help key workers.
If you are a key worker, you can now keep 100% of any overtime you have earned during the coronavirus pandemic (currently defined as being between 20th April 2020 and 31st July 2021). Non of this extra money has to be paid into your IVA.
This change only applies if you are a key worker (as per the government approved list) in a Protocol IVA. If you are not, the standard overtime rules remain unchanged.
Rules if your IVA is not based on the Protocol terms and conditions
Not all IVA terms and conditions are based on the Protocol. There are other versions. One used by some firms is known as the “R3 terms and conditions”. The government guidance only covers Protocol based IVA agreements. Not any other.
This means that if your IVA is based on a different set of conditions (for example R3), these remain in force. You still have to pay up to 50% of any overtime earned during the coronavirus into your IVA. This applies even if you are a key worker.
It is possible for your IVA company to call a variation of your IVA to waive the overtime rules during the Covid 19 pandemic. However this is entirely down to their discretion. They are not obliged to do so.
How can you tell on which terms and conditions your IVA is based? The best way is to look at the original agreement you signed. Compare the terms and conditions to that of the IVA Protocol (2016)
What if you can’t pay your IVA?
The government guidance for Protocol IVAs also assists people who are struggling with their monthly payments. If your income falls between April 20 and July 21, your IVA company can reduce your payments by between 25%-50% for 6 months without the approval of your creditors. Alternatively they can allow you to take a 6 month payment break. This is over and above any break you may have already taken and or are allowed under the terms of your current IVA.
For non Protocol IVA’s, the standard terms of your agreement should still allow you to take payment breaks of up to 9 months in total. However any significant reduction in your monthly IVA payments will still have to be agreed with your creditors with a formal variation.
Where you can no longer afford to pay your IVA due to the coronavirus and your income is unlikely to recover, you have the option of stopping it altogether. If you are not a home owner, going bankrupt might be a sensible alternative option. This is because no further monthly payments are required if you have no surplus income.
If you can’t pay your IVA give us a call. We can advise on whether you could benefit from reducing your payments or stopping the Arrangement and doing something else.