Your IVA Company may refuse to add new debt to your existing IVA. This could be the case if you have borrowed more during the Arrangement without their agreement.
- Can you add new debt to an existing IVA?
- Paying new debt using a payment holiday
- Alternative options if new debt cannot be added
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Can you Add New Debt to an existing IVA?
It is possible to add new debt to an IVA. However it is not an automatic right. You first need agreement from your Insolvency Practitioner (IP) and very often your creditors. Whether or not they will be willing to help depends on the circumstances.
If you simply forgot about the debt or were not aware of it when you first set up the Arrangement there is every chance it can be added now. However if you have borrowed more since the agreement started your IP may not be so helpful.
If you did not consult your IVA copmpany before you borrowed more and especially if you took a Payday loan they will often refuse to add it. This is the case even if you will struggle to maintain the payments in addition to your IVA.
If you need to borrow more during your IVA you should first discuss the situation with your IVA Comapny. If you are facing an emergency they may be prepared to help you.
Paying New Debt using a Payment Holiday
If your IP refuses to add a new debt to your IVA the next step is to try and repay it yourself. Clearly the problem is that this is unlikely to be affordable especially if you are also trying to pay your Arrangement.
One solution is to ask for an IVA payment break. This will allow you to suspend the payments you are making into the Arrangement. The money you save can then be used to pay off your new debt.
The payments you miss are added to the end of the agreement. Most IPs will agree to this as the original creditors still receive exactly the same amount as was first agreed.
Trying to repay a new debt without a payment break from your IVA will be very tough. It would require you to cut back on some of your living expenses which is likely to be extremely difficult.
Alternative options if New Debt cannot be added to your IVA
If your IVA Company refuses to add new debt and you cannot agree a payment holiday the alternative options are limited. At this point you may need to consider allowing the Arrangement to fail.
If you are a home owner with equity in your property you could start a new IVA including all of your debt both old and new. However it is important to understand that you would then be faced with paying for another 5-6 years.
Alternatively you could start a Debt Management Plan. However the downside to this is that you are obliged to repay all of the debt you owe in full. As a result it is likely that you would end up paying for much longer than if you start a new IVA.
If you are renting or there is little or no equity in your property Bankruptcy might be a better solution. All of your debts would be taken away from you and any ongoing payments you have to make would only last for 3 years.