There are a few reasons why a new debt may emerge during your IVA. If so what can you do? There are different options. Rather speak to someone? Call 0800 077 6180.
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- Pay the new debt off with a payment break
- Can the debt be added to your IVA?
- Cancel the IVA and start a new one or use a different solution
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Pay the new debt off with a payment break
When you start an IVA make sure you check your credit file to ensure you have included all your debts. It is possible that you could negotiate a payment break with your IVA company. However, this is only likely if the new debt is quite small and it poses some risk to your IVA if it remains unpaid. The break would usually be added on to the end of your IVA.
Whether it is agreed also depends how the debt was created. Was it a genuine mistake, was the money borrowed for an emergency or health situation? In principle it is not fair for one creditor to be paid in full when the majority are receiving only a fraction of the money they are owed.
A debt emerging during your IVA can cause problems that could put your IVA at risk. Even if a debt emerges after the IVA is finished you will be liable to pay some of the missing debt back. Whatever that creditor would have received in your IVA, you will have to pay them.
A payment break is usually allowed where your IVA might otherwise be at risk of failing. This could be a temporary loss of income or an emergency expense of some sort.
Can the debt be added to the IVA
Your IP can at their discretion add smaller debts to your IVA without consulting creditors. If the new debt is 10% or less of the existing debts in the IVA then often it will just be added.
Where the new debt is larger than 10% of the existing debt, your IP would have to consult your creditors. This is done through the process of a variation order. Put simply this is a formal renegotiation of your IVA. If your existing creditors agree to the variation, they will probably be agreeing to less money overall.
So will creditors agree to a new debt being added? Well, creditors are usually open to variations because the alternative is that the IVA would fail and they would receive little or no money at all. They will however usually ask that the length of the IVA be extended to balance the scales a little.
Debts could emerge from over payment of benefits. These can be quite large amounts due to an unreported change of circumstance. If this was an honest mistake these debts can usually be added to the IVA.
Cancel the IVA and start a new one or use a different solution
If you cannot add the debt to your IVA for whatever reason, you may need to re-evaluate which solution you should use. It might be possible to run an informal repayment plan alongside your IVA. However you may not be able to afford to and it is likely your creditors will not approve of it.
There is a misconception that a failed IVA always leads to Bankruptcy. That’s not necessarily the case. You would not usually be forced to go bankrupt, unless you owe money to HMRC. If you do check your terms and conditions. HMRC may have insisted that if you fail your IVA you must be made bankrupt.
When your current IVA is going to fail as a result of the new debt/s, then you should take this opportunity to consider whether a new one the best option for you. If you are not a home owner you should consider bankruptcy. It could be an ideal solution if your surplus income is low. You may not have to make any further payments and be debt free in just 1 year.
You cannot transfer your IVA to another IVA company. If you cancel it and want to start a new one be aware that you overall debt may well still be the same as when you started.
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Hi,
I want to go for IVA because I am struggling to meet up with my bills at the moment. Can I still have student loan to further my education when on IVA
Hi Ayo
Yes, I confirm you can get a student loan from the student loans company while you are in an IVA. This type of debt is not officially credit and so access is not dependent on passing a credit check.
That said if you are considering going into further education in the future you need to think carefully about whether you will be able to afford to maintain your IVA payments during that time. If not then the whole agreement would be at risk of failure.
Are you a home owner? If not then if I were you I would also have a serious look at the option of going bankrupt. You could then study and get student loans no problem and would not have to worry about ongoing monthly payments towards your debts.
Hi.
I am a single mum who found myself In need of a loan three years ago. I applied for a loan with everyday loans. After processing all the paperwork they told me they could not help me as I already had an IVA set up and was paying this.
I was then called by a manager who also explained they had checked and that I could not have the loan. I then found four days after this the money had be been sent to my bank account.
I paid the loan for 6 months however started to struggle. They refused to set up a payment plan for me so my arrears on the account grew. They started to call my place of work and speak to colleagues. They actually told me ‘we do not like people who don’t pay’ a manager has since apologised for this.
After losing my job in March I can no longer afford to make any payments. I now owe over 5k, I borrowed less than 2k. I am very worried and wanted to know if they can enforce this loan in court ?
Thank you.
Hi Frances
We are not solicitors here so I can’t confirm 100% whether this loan is enforceable or not. However I suspect that it is enforceable given you accepted the loan by the fact that you spent the money and maintained the repayments for 6 months.
Given this is right and it is enforceable, you will not have any hope of adding it to your current IVA. I believe it is Everyday Loans policy to reject IVAs. Therefore depending on your circumstances (particularly if you are not a home owner) it might be sensible to consider stopping your IVA altogether and using bankruptcy to write off all the debt (including this Every Day loan) once and for all.
By all means given me a call (0800 077 6180) and I would be happy to chat the implications through with you.