Can My IVA Payments Ever Go Up

It is important to understand that your payment can go up during an IVA. It is not fixed.

This will normally occur if your income increases. However there are other reasons too. But what does this mean for the length of your IVA and what can you do if you are not happy?

Use this guide to find out everything you need to know about how your IVA payment can go up and what your options are if it happens. Or give our experts a call on 0800 180 8013 for any questions.

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Can my IVA payments go up after it is agreed?

You might think that once your IVA has been agreed, the monthly payment you will have to make is fixed. But this is not the case.

Your payment can (and often will) go up during the course of the Arrangement.

The reason is that an IVA is not an agreement to repay a fixed amount of debt. It is actually an agreement to pay as much as you can, depending on your circumstances.   

As a result, under the terms of your Arrangement, if you are able to increase your payment, you have to do so.

It is relatively common for payments to increase during a 5-6 year IVA. It is important to be aware of this and something to consider when deciding if it is the right solution for you.

Why could your IVA payment go up?

There are two situations which can lead to your IVA payment going up:

1 – Increase in your income

One of the key reasons your IVA payment might go up is when your income increases. There are different ways your income can go up including:

• A permanent increase in your wages (not just temporary overtime or a bonus)
• Your self-employed income goes up
• You start getting an additional income such as a pension payment

When your income goes up, you must tell your IVA Company within 14 days. They will ask you to complete a new income and expenses budget so they can assess any change in your surplus income (the amount you currently pay into your Arrangement).

Your IVA payment will go up by 50% of any increase to your surplus income.

For example:

Let’s say your original surplus income (and IVA payment) is £200/mth. Then, as a result of an increase in income, your surplus goes up to £300/mth. The difference is £100. So your payment will go up by £50 to £250/mth (50% of the £100 increase).

If you need any further help understanding this, please get in touch and our IVA experts can talk you through your IVA payments going up.

2 – Reduction of your living expenses

The other key reason why your IVA payment can go up is if and of your monthly living expenses fall.

You may be thinking that a fall in living costs is pretty unlikely. However, there are some specific reasons when this can happen. Good examples of this are:

• Your car HP agreement comes to an end
• A child maintenance payment finishes

These types of events can result in your living expenses falling by hundreds of pounds each month. When this happens, you can’t just keep the extra money. You will normally have to add 100% of the saving to your IVA payment.

Ultimately you won’t be any worse off. But you won’t be any better off either (until your IVA is completed of course).

Generally speaking, at the very start of your IVA, you should be aware that these types of reductions in your expenses are likely to happen. As such, they should not be a surprise.

If your payment goes up, will your IVA be paid off early?

When your IVA payment goes up, this does not mean you will pay off your plan any faster.

You will still have to make exactly the same number of remaining payments. You simply pay more into your IVA overall than your first thought.

So what happens to the extra money you pay in?

After your payment has increased, most of the addition money you pay into your IVA goes to your creditors. Overall they get more of their money back. Your IVA company’s fee will also increase slightly as they will normally get 15% of any increase in your payment.

There is only one way a payment increase could result in you paying off your IVA early.

This can happen if you manage to pay 100% of the original debt you owed plus the IVA company fees and costs before the original last payment date. When this happens, you will complete your IVA early and your payments stop. 

After your IVA payment goes up, the percentage of debt written off by the Arrangement becomes less.

What are your options if your IVA payment goes up?

You may not be happy that your IVA payment has gone up and feel that your IVA Company is not listening to you.

In these circumstances, you can consider the following options:

1 – Agree and carry on with your IVA

If you refuse to increase your IVA payments, as instructed by your IVA Company, they ultimately have the power to cancel the agreement.

This would result in the failure of your IVA.

After an IVA fails, it is likely that a significant amount of the debt you originally owed will still be outstanding. Your creditors can then re-start enforcement actions to collect this.

You may decide that simply agreeing to the increase in your payment is better than it failing.

Unfortunately you can’t move to a different IVA Company. You can only do this if you let your current agreement fail and then start the whole process again.

2 – Stop paying and let your IVA fail

Where you can’t come to an agreement with your IVA Company and are not willing to increase your IVA payments, you can decide to let your Arrangement fail.

You can do this by simply by cancelling your monthly payment.

However, if you choose path, you must have a plan in place for how you will manage the debt that you will still owe.

This could be in the form of a Debt Management Plan (DMP) – ideal if you can afford to repay your remaining debt in a reasonable time (based on affordable monthly payments).

Alternatively, if you are a not a home owner with equity in your property, going bankrupt might be a sensible option to consider.

It is not advisable to cancel your IVA without taking expert advice. If you are unhappy with your IVA payment increase and want to consider your options, contact us today.

Could your IVA payment ever go down?

It is possible for your IVA payment to do down.

The most likely time that your IVA Company might agree a reduction is if you have had a permanent fall in your income. Perhaps you have had to take a lower paying job or have had a reduction in your working hours.

You may also be able to request a reduction if one or more of your living expenses have specifically increased. A good example of this would be a significant increase in your rent.

However, it is very unlikely that your IVA Company will let you reduce you payments simply because the general cost of living – such as supermarket shopping – has increased.

A reduction to your payment is only likely to be agreed if the Arrangement will still be financially viable. It may not be viable if you are asking for your payments to drop much below £100/mth.

You will need normally only be allowed to reduce your payment if you also agree to extend your IVA. This will usually mean an extra 12 months of payments being added (although it could be more in some circumstances).

Reducing your payment will usually mean your IVA will be extended and you will have to pay it for longer. Give us a call on 0800 180 8013 to find out more or ask our IVA experts any questions surrounding IVA payments.