Maybe you can’t pay your IVA because your circumstances have changed. Alternatively you may have agreed to an amount you can’t really afford. There are various ways to solve the problem.
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If you can’t pay your IVA could the Payments be reduced?
If your circumstances have changed or you can’t pay your IVA because the the amount you agreed is unaffordable it may be possible to reduce the payments. IVA companies are used to working with people facing this problem.
You will need to provide a new income and expenses budget which highlights the changes or where you believe there were errors made in the first place. If your IVA company agrees and your payments are not already too low to reduce further they should try to help.
It is important to understand that in exchange for any permanent reduction in your payments your IVA will be extended. Normally an extra 12 months will be added. This is to compensate your creditors (at least in some way) for the reduced amount they will now receive.
If you are only facing a short term reduction in your income or an unexpected emergency, permanently reducing your payments is not normally the answer. In these circumstances you should think about taking a payment break.
Is it possible to settle your IVA Early?
If you can’t pay your IVA rather than reducing the monthly payments and extending its length you can consider settling it early. This is where you (or a third party) gives a cash lump sum in place of the ongoing payments.
You will normally have to offer the pay the total of the outstanding payments. So if you agreed to pay £120/mth and have 4 years to go the offer would have to be £5760 (£120 x 48 months).
This option can work well if you have access the necessary funds. Most commonly these would come from a third party such as a family member or friend. However you may be able to get funds from elsewhere. For example withdraw cash from your pension if you are over the age of 55.
If you have lost your job you will not automatically be able to use redundancy money to settle your IVA. This is treated as a windfall and would have to be paid into the arrangement less the amount you need to live off.
Let your IVA fail and do something else
Your IVA company may not be able to reduce your payments. This can occur if they are already low. If you are currently paying less than £100/mth, going any lower may mean your IVA is no longer financially viable. If you are facing this situation and getting a lump sum to settle is not an option you may have to let your IVA fail.
If you want you are allowed to stop paying your IVA at any time so that it fails. However before doing so you need to have a plan for what to do next. Remember that a large amount of your original debt is likely to remain outstanding.
Your options will include starting a new IVA if you can find another IVA company who will work with you. Alternatively you might want to consider a different solution. If you can’t afford to make ongoing payments and are not a home owner going bankrupt may actually be your next best option.
If you are considering stopping your IVA and starting another we can help. Give us a call (0800 011 4712) or complete the form below and we will call you.