You start paying your IVA as soon as it is accepted. The amount you pay is assessed at least once a year during an Annual Review.
- How do you pay your IVA?
- Annual Review to re-assess your circumstances
- Could your payments change?
- Taking a Payment Break during an IVA
How do you pay your IVA?
If you have a monthy payment IVA you will have to pay an agreed amount into it each month. The payments normally start in the month after it is accepted by your creditors.
The easiest way to make the payment is to set up a standing order from your bank account. If required you may need to open a new account before hand. This will normally be the case if you owe money to your current bank.
Where you do not have a bank account and do not want to open a new one it is acceptable for your payments to come from someone else’s. This may happen if a third party is paying your IVA on your behalf.
If you have a Lump Sum Payment IVA you must pay the required cash to your IP in full within the agreed timescales.
Annual Review each year to re-assess your circumstances
It is important to understand that your financial circumstances continue to be monitored during your IVA. Once a year on the anniversary of the start date your IVA company will contact you to undertake an annual review.
They will ask you to tell them about any changes to your income or expenses. You will also be asked to complete a new living expenses budget.
In addition you will have to send in up to date paperwork to confirm the information you submit. Generally speaking this will include your last 3 months wage slips and bank statements. However you could be asked for the last 12 months.
Do not wait for your annual review to inform your IP if your circumstances change. If you are required to pay more any delay in informing them could mean your IVA falls into arrears.
Could your IVA Payments change?
IVA payments are not fixed. If your income improves or living expenses fall your disposable income may increase. When this happens the amount you pay into the agreement will also go up.
Your payments will not normally increase at the same rate as your disposable income. If that figure increases by less than 10% you will be allowed to keep the extra money without having to pay any more into your Arrangement.
Where the increase is more than 10% the extra is split 50/50 between you and your IVA. For example if your current payment is £100/month and your disposable income increases by £50/mth your IVA payment will only increase to £120.
If your income falls or living expenses increase you may be able to reduce your IVA payments. However this will normally have to be accepted by your creditors.
Is it possible to take a Payment Break during an IVA?
Unexpected expenses can come up during an IVA such as an urgent home or car repair. If you do not have enough set aside to cover these it can be a real issue.
If you are facing a financial emergency you might think about borrowing more to cover the expense. However a far better option is to ask your IVA company for a payment break.
A payment break allows you to suspend your agreed payments and use the money to pay for the emergency instead. Once it is resolved your payments start up again. The ones you missed are added to the end of the Arrangement.
You should avoid the temptation of borrowing from a Payday lender during your IVA. Trying to repay a new loan and your IVA will be impossible and is likely to put the whole Arrangement at risk.