Living expenses increase all the time. Income can also go down through wage cuts or a job change. If you are currently in an IVA and either of these things happen you may want to reduce your payments.
Jump to article contents:
- Are you allowed to reduce your IVA payments?
- When can you reduce your payments?
- What is the likely impact of reducing payments?
- What can you do if your payments cannot be reduced?
Considering your options? Call 0800 077 6180 or complete the form below to speak to one of our experts.
Are you allowed to reduce your IVA payments?
If your living expenses rise or your income falls you will need to consider reducing your IVA payments. However you cannot make this decision yourself. The Arrangement is a legally binding agreement between you and your creditors.
As such before you make any changes to the amount that you pay each month you must first discuss and agree this with your insolvency practitioner (IP). You will normally have to complete a new living expenses budget.
Where your income has fallen or expenses have increased you will need to provide proof of this. Normally you will need to submit documentary evidence such as wage slips or a benefits statement or evidence of the larger expenditure.
Your IP can approve a reduction of up to 10% of your monthly payment without getting creditor approval. More than this would require a formal variation of the IVA.
When can you reduce your payments?
If your IP is satisfied there has been a reduction of your income or material increase in your living expenses, a reduction of your payments is possible.
Examples of a material increase in your living expenses include the birth of a new baby or an increase in your mortgage or rent.
It is unlikely that you will be allowed to reduce your payments simply because “general living costs” such as the cost of the weekly shop have gone up. Where this happens you will normally have to budget accordingly as best you can.
You will not be able to reduce your IVA payments if doing so means the agreement is no longer sustainable. This could be the case if your payments are already relatively low.
What is the likely impact of reducing your IVA payments?
The normal impact of you reducing your IVA payments is that the Arrangement will be extended. Generally speaking you will be required to pay for an extra 12 months.
The extra payments you make go towards making up the money that your creditors lose due to the reduced amount you will be paying from now on.
If your IVA company has agreed to your reduced payment without having to get the approval of your creditors (where the reduction is less than 10% of your payment) they may not require you to make extra payments. However this is cannot be guaranteed.
What can you do if your payments cannot be reduced?
If your IVA company is unwilling to help you reduce your payments your options are limited.
The first thing to consider is whether you can simply make cuts to your expenses. If you can tighten your belt and maintain your original payments you can continue with your Arrangement as normal.
Where you simply cannot make further cuts to your budget and if you are not a home owner you could also consider stopping your IVA and going bankrupt to deal with your debts. Once you are bankrupt you only have to make ongoing payments if you can afford to do so.
If you are struggling with your IVA payments and considering bankruptcy give us a call (0800 077 6180). Our adviser can discuss whether it would be a sensible option for you.
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