Can you pay your IVA early by making bigger payments

Can you pay your IVA early by making bigger payments

The amount you pay into an IVA is agreed at the beginning. But will it be paid off early if you increase your payments?

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What happens if you make bigger IVA payments?

A monthly payment IVA lasts for 5-6 years. During this time you might get the opportunity to earn more. Perhaps you will do overtime or get a permanent increase in your income.

If this happens and you increase your IVA payments you might think the agreement will be paid off faster. This is not what happens. The length of the Arrangement is fixed, the amount you pay in is not.

The terms and conditions will say that if you pay more the amount that you pay back to your creditors just goes up. It simply means they write off a smaller amount of debt.

Your IVA is not paid early if you increase your payments. The result is simply more of your debt is paid back.

Do you have to increase your IVA payments if you can?

Increasing your payments will not help pay your IVA early. As such you are probably thinking it is not worth doing. Unfortunately you do not have a choice.

You have to tell your IVA company if you earn any extra money. It does not matter if this is from overtime, a bonus or anything else. You can keep up to 10% over your standard wage. 50% of anything over that has to be handed over.

Where your income increases or your expenses your IVA company must review your entire income and expenses budget. If your surplus income has permanently gone up your payment will go up by the equivalent of 50% of the increase.

If you can afford to pay more into your IVA your payments must increase. You have no choice about this.

How can you pay your IVA early?

It is possible to pay your IVA early if you can offer a cash lump sum. As a rule of thumb this will have to be an amount equivalent to the total of your remaining monthly payments.

The lump sum can only come from some specific sources. One option is for a third party to lend you the money. You can pay them back after your Arrangement is settled.

Alternatively you might be able to release funds from your property or pension. This has to be done with prior agreement from your IVA company. If not any money you release could be treated as a windfall and would have to be paid into the Arrangement.

You can’t pay your IVA early using a windfall you have received unless you can afford to repay the total of your original debt plus costs.

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