If your wages go up during your IVA, it is likely that your monthly payment will also increase. In other words, getting a pay rise will mean you will have to pay more into the Arrangement.
Included in this article:
- If my wages go up will my IVA payment increase?
- Will my IVA be paid off sooner?
- What happens if I do extra overtime?
Need more advice about an IVA? Give us a call (0800 077 6180) or complete the form below. Its free and confidential
If my wages go up will my IVA payment increase?
Once you start an IVA, the amount you pay each month can increase. One of the most common reasons for this is when your wages go up.
You must tell your IVA company after you get any pay rise. They will do a review of your income and expenses and calculate how much your monthly payments will change.
You won’t have to hand over all the extra money you get each month. As an incentive to earn more during the Arrangement, you only have to increase your monthly payment by 50% of the extra surplus income you have as a result of the pay increase.
In other words, if your wages go up and your surplus income increases by £200/mth, you will only have to add half of this (£100/mth) to your monthly payment. The other £100 will be yours to keep.
A standard IVA lasts for 5-6 years. During this time it is quite likely that your wages will go up and so your monthly payment will increase. You should consider this before you start the Arrangement.
Will my IVA be paid off sooner if my wages go up?
Your IVA is unlikely to be paid any sooner if your payments increase after your wages have gone up.
The agreement (which you signed up to at the start) does not state that you only have to pay a certain amount of your debt back. It actually states the minimum amount you will pay and that you will pay more if and when possible.
So if your wages go up and your payments increase, the Arrangement will not be paid off any sooner. The end date and the number of payments you have to make will stay the same. All it means is that you will pay back more overall towards your debt.
If you have a very large pay increase, you could find yourself in a situation where you will actually end up paying more into your IVA than you originally owed.
This is because the agreement actually states that if you are able, you must repay 100% of your original debt plus your IVA company’s fees and costs. The situation is rare, but it is possible.
Facing a situation where you are likely to repay more into your IVA than you originally owed? It might be better to cancel your IVA and manage your remaining debt in a different way.
What happens if I do extra overtime during my IVA?
Your wages may not go up permanently. You might be get a temporary increase because you work extra overtime or get a one off bonus in just one month.
In these circumstances, if the amount you receive is less than 10% of your normal monthly take home, you will be allowed to keep the extra money. However anything over 10% will need to be split between you and your IVA. You keep 50% of this and 50% must be handed over.
As an example, lets say your normal take home pay is £1500/mth. Then in one month you get overtime or a bonus of £300. The first £150 of this is your’s to keep (10% of your normal taken home). However, 50% of the remaining £150 must be handed over. So for that month you will have to pay an extra £75 into your IVA.
It is therefore very important to tell your IVA company immediately if you ever earn overtime or get a bonus. Don’t wait for your next annual review. If you delay, you are likely to owe money to your IVA at the end of the year. If you can’t afford to make up the payment, it may cause the Arrangement to fail.
Unhappy about having to increase your IVA payments? Call us (0800 077 6180) or complete the form below for advice about whether cancelling and changing to a different solution might be a better option for you.
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