If you are struggling to pay your IVA, you can ask for your payments to go down. However a reduction may not always be possible and where it is, the agreement is likely to be extended.
Included in this article:
- Can your IVA payments go down if you are struggling?
- Will the agreement be extended?
- Can your IVA company refuse to reduce your payments?
- What if you can’t afford the minimum IVA payment?
Can your IVA payments go down if you are struggling?
You may be struggling to pay your IVA if your income has fallen or your living expenses have increased. Where this has happened your payments can go down.
However, you can’t just make the change yourself. You need to get agreement from your IVA company.
First, speak to them and explain the situation. They will ask you to complete a new income and expenses budget. This will highlight the problem and show how much your surplus income (the amount you can afford to pay into your IVA) has fallen.
As long as the reduction is less than 15% of what you were originally paying, your payment can be reduced without the IVA company having to ask your creditors.
Where you need your payment to go down by more than 15%, this will have to be agreed by your creditors in what is known as a variation of the Arrangement.
It will not usually be possible to reduce your IVA payment below the minimum acceptable amount which is usually between £80-£100/mth.
Will your IVA be extended?
When you ask your IVA company to lower your payments, you need to understand that in return, you will have to accept an extension to the number of payments you have to make.
As standard they will require you to pay an additional 12 – 24 months. In certain circumstances it could be more than this.
The reason for the extension is to compensate your creditors for the money they will lose when you start paying less each month.
It is very unlikely that you will get agreement to put your payments down without accepting this type of extension. If you don’t agree, your payments will not be reduced.
You can’t just reduce your payments without getting agreement in writing from your IVA company. If you do, they will fail the agreement.
Can your IVA company refuse to reduce your payments?
Your IVA company does not have to lower your payments. If they do not accept your reasons for asking for the reduction, they can refuse. Where this happens, you must continue paying as normal.
A number of reasons will normally be accepted. You may be struggling due to fall in your income or a specific increase in your living expenses. For example the birth of a new baby.
However, less defined changes to your circumstances will often be rejected. For example, trying to argue that you are struggling because the cost of living has generally increased will not normally be accepted.
In addition, a reduction may still be rejected even where your reasons are valid, if your monthly payments are already close or equal to the minimum acceptable payment. You will not be able to lower your payments because it would mean your IVA is no longer financially viable.
Recent increases to living costs such as rising electric, gas and petrol costs should be accepted as valid reasons to review whether IVA payments can be lowered.
What if you can’t afford the minimum IVA payment?
If your IVA company will not put your payments down, there is unfortunately nothing you can do. There is no-one you can escalate your situation to or make a complaint to that will make any difference.
Given this, you have two options. Accept the payment will not go down and continue paying or cancel the agreement.
It is possible to cancel your IVA at any time. This can be done by simply stopping the payments. However, you need to understand that some (and in some cases all) of the money you have already paid in will be taken by your IVA company to cover their fees. This means you could still owe the same amount to your creditors as when you started.
Before cancelling your IVA, you must therefore have a clear plan in place for how you will manage any debt you still owe. If you are a home owner, this might involve a debt management plan. If you live in rented accommodation, bankruptcy might be an ideal option as you may not have to make any more monthly payments at all.
Are you struggling to pay your IVA? We offer advice on your options. Give us a call (0800 011 4712) or complete the form below. Its free and confidential.