Usually an IVA involves paying an affordable monthly payment over a fixed term, typically 5 years. But are there ways of doing an IVA with either low or even no monthly payments? Rather speak to someone? Call 0800 077 6180.
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- The minimum payment for an IVA
- Can your payments start lower then increase?
- Cash lump sum instead of monthly payments
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The minimum payment for an IVA
It is important to remember that you will always pay what you can afford to your IVA. If you have £350 left each month after you have paid all your normal living expenses, then you would pay that to your IVA.
There is no set minimum IVA payment, but there is a point at which it is not worth doing for either the creditors or the Insolvency Practitioner. So there is a typical lower limit which has dropped considerably over the last decade.
10-15 years ago it was not uncommon to see a minimum IVA payment set to £300. Today however this lower amount is nearer to £100. You might be surprised how much you can afford once you no longer have to pay your creditors.
Some providers will say that you can do an IVA for £80 or even lower, but remember this amount is not fixed. This amount can and often does increase during the IVA as your income goes up or expenses come down.
Can your payments start lower then increase?
This is possible where there are definite changes in your future that will result in your IVA payment increasing. This is sometimes called a stepped IVA. You pay lower payments at the start and higher ones later in the agreement. This makes the overall pot of money acceptable to creditors.
For example, if you know you are going to get an increase in your income in the future then you could start with lower payments. This could be an expected increase in hours or a promotion. Your disposable income would increase and therefore your IVA payment will also increase.
A similar situation might happen if you know some of your expenses will reduce. The best example of this is if you are paying car finance which will finish while you are in your IVA. you then have extra funds to go into the IVA payments.
A ‘stepped IVA’ is only acceptable if you are able to prove that the change is going to happen. Simply offering to try to increase the IVA payment later would not be enough.
Cash lump sum instead of monthly payments
If you cannot afford to make monthly payments it may still be possible to do an IVA. If you or a third party can make a lump sum available which can be used to make a single one off payment, creditors may accept this.
This would allow the Arrangement to be settled with a one off lump sum payment from the outset. There will be no subsequent monthly payments and the rest of your debt will be written off immediately. There are then none of the usual restrictions of a usual 5 year agreement.
Such a lump sum might simply be raised by members of your family. Alternatively may have recently received a redundancy payment or a windfall of another sort which you could consider using. Some people are also able to raise funds by releasing equity from their homes.
The burning question is, how much is enough? That depends on a range of things we can advise you on. Rest assured an IVA will never leave you in an un-affordable or unrealistic financial situation.
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Hi James – grateful for some advice. I have arrears on mortgage totalling £13000 and a possible shortfall of £60000 also £6000 for loan. I have approached a debt management company with there help we have agreed an IVA lump sum of £14000 which has been accepted by my creditors. Do you think this is a good deal??
Kindest Regards
Dave
Hi Dave
From what you have said I assume that you are in the process of handing back your property to the mortgage lender. The shortfall will only exist once the property is sold and the outstanding debt calculated. Having said that it is possible to include an “anticipated” shortfall in an IVA.
Given you anticipate the shortfall will be £60,000 then settling this and the additional loan for £14k does seem on the face of it to be a reasonable deal. However before going ahead I would suggest you also consider the option of bankruptcy. Given you have already lost your home you could argue you no longer have anything to lose.
If you go bankrupt you can potentially write off the entire debt for just the cost of the £680 application fee thus saving yourself just over £13,000. There may be other implications to consider such as whether you would have to make ongoing payments from your income. However whenever a house is being repossessed 9 times of of 10 bankruptcy is more advantageous than and IVA.
By all means get in contact if you want to discuss this before going ahead with the IVA (0800 077 6180).
Does being a company director stop me from doing a personal lump sum IVA. It’s my company and doesn’t make any money but I’d like to keep it if I can.
Hi John
You can certainly do either a normal monthly payment IVA or a lump sum IVA if you are a company director. You do not have to resign and are allowed to continue running your business. In fact one of the original reasons for the introduction of the IVA solution into the law was to assist company directors with their debts.