When you first started on your IVA (Individual Voluntary Arrangement), your monthly payments will have been based on what you could afford at that time, taking into account all your other costs.
Your Insolvency Practitioner (IP) will have done what they could to account for any likely changes in your finances – but nobody can completely predict the future. It’s quite possible that your available income will go up or down during your IVA, and if this happens your IVA payments may need to change accordingly if your IVA is to reach a successful conclusion.
What are the reasons my payments might need to change?
You might need to change your payments if your income falls – due to a pay cut or a loss of bonuses, for example. Similarly, your income may well increase during the course of your IVA, in which case you’d probably be expected to pay more.
Alternatively, you might find your essential outgoings increase, leaving you with less money available to put towards your IVA. Or your outgoings might fall – as many people have found with their mortgage payments in recent years.
What should I do if I think my payments need to change?
You should always contact your IP to explain the situation if your circumstances change. They will tell you what action you need to take, if any.
Most IVAs will have something written into the terms to account for relatively small changes in your circumstances – so it may be quite simple to make a small change to the way you’re making your payments.
If it’s a larger change, your IP may have to ask your creditors to consider an IVA variation – a legally binding change to the way your IVA works.
And if your circumstances have changed significantly, the situation could be more complicated. For example, if you can simply no longer commit to the terms of the IVA, it may well be that the agreement has to fail, in which case you’ll need to look at alternative solutions (such as bankruptcy).
On the other end of the scale, you may find that your circumstances improve significantly. In this situation your payments will be expected to increase, and in fact if your circumstances improve enough – if you receive a ‘windfall’, for example – you may be able to bring the IVA to a successful conclusion earlier than expected.
Note: entering an IVA will affect your credit rating for six years, and if you’re a homeowner you may have to free up equity in your property so you can pay more into your IVA.
For more on IVA’s, visit this site.
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