You might receive a pay rise during your IVA for any number of reasons. Most recently perhaps, to help with increases in the cost of living. But when this happens, will your IVA payments also go up?
Included in this article:
- Will your IVA payments go up after you get a pay rise?
- Is the length of your IVA reduced?
- Can you hide your pay rise from your IVA company?
- What if you cannot afford the increased payments?
Need help with your IVA? Give us a call (0800 077 6180) or complete the form below. The advice is free and confidential
Will your IVA payments go up after you get a pay rise?
Most IVA companies will look to increase your monthly payment after you get a pay rise. But this should not happen automatically.
Before any increase is put in place, there should be a full review of your income and expenses budget. This will give the opportunity to take account of any increases to your living expenses as well as your income.
You should include specific expenses increases. For example a change in child care costs or an increase in your rent or mortgage payment. Also, some cost of living increases should be added. In particular increases in your electricity, gas and fuel bills.
Your IVA company may not agree to all of your cost of living increase claims. They may, for example, reject an increase in your housekeeping budget. After a pay rise they will expect your monthly payments to go up by at least something.
If you earn extra overtime during an IVA, your income and expenses are not reviewed. You simply have to hand over 50% of any overtime you have earned during the month.
Is the length of your IVA reduced after a pay rise?
You may think that if after a pay rise, the amount you pay into your IVA goes up, the Arrangement will be paid off faster. Unfortunately, this is not the case.
The number of your remaining payments will stay the same as before. The increase simply means you will pay more into your IVA and your creditors will get back a greater amount of what they are owed.
This situation could mean that you will now pay more into your IVA overall than the amount you originally owed. This is is possible because the terms of the Arrangement will say that where you are able, you have to pay up to 100% of your debt owed plus your IVA company’s fees.
Where you are facing the prospect of repaying more into your IVA than you originally owed, one option may be to cancel the Arrangement and manage your remaining debt a different way. Whether you should do this or not will depend on your wider circumstances.
Do not cancel your IVA without speaking to us first. You need to understand all the implications before deciding to take this action.
Can you hide your pay rise from your IVA company?
One of the main terms of your IVA is that you have to tell your IVA company about any pay rise you receive. You should normally do this within 14 days of becoming aware of the change.
You can’t decide not to tell them and hope to hide the fact that you have more money coming in. When you do your annual review, you will normally be asked to provide recent wage slips and/or bank statements. The increase in your pay will be picked up from these.
Any increase in your payment will be back dated to the date you got your pay rise. So if you didn’t tell your IVA company straight away, you are likely to find yourself in arrears.
Some IVA companies might allow you to catch up by adding extra payments at the end of your Arrangement. However others will demand you make even higher monthly payments.
What if you cannot afford the increased payments?
Once your pay rise has been reviewed, it’s possible that the increase in your payment is unaffordable.
This could be because your IVA company has refused to include some of the increases you believe you need in your living expenses. Alternatively, the budget that has been allowed is simply not enough to cover what you really spend.
In this situation, the first thing you should do is request another income and expenses review. You need to make clear to your IVA company which expenses you feel have been missed or are incorrect. If they are still unable to help after a second review, there are only two options.
Either you struggle on with the increased payments and cut your costs elsewhere, or you can think about cancelling the Arrangement and using a different debt solution.
Where you are not a home owner, cancelling the Arrangement and going bankrupt may be the next best option.
Can’t afford a recent increase in your IVA payments? Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
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