IVA Minimum Payment: Paying Off Your IVA

If you do not maintain your payments to the trustee your Individual Voluntary Arrangement (IVA) can fail. This article explains the best way to pay off your IVA and the minimum payment required.

What minimum payment will be offered to me?

Without further information, it would be difficult to be specific. For example, it could take 21 years to repay a debt of £27,500 (257 payments) with no interest or charges. If you are paying £100 a month into an IVA then it may be that the repayments will end after 5 or 6 years. If you are bankrupt then it might only be 3 years of payments are required.

What happens if I hide money from the IVA company?

This is against the terms of your IVA. Since an IVA is governed by the court, this would also be against the law. You must notify your Insolvency Practitioner (IP) immediately of all your income and any money you receive during your IVA, such as inheritance. It is fraud if you hide money. This means you could go to jail for not informing your IP. If your IVA fails, you will be forced into bankruptcy. This could have worse consequences for you.

You may also want to read our article on what to do when you are not happy with your IVA company.

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Can an IVA request a life insurance payout?

An IVA proposal contains information about how this would be dealt with if someone receives money from an insurance payment whilst they are still within the term of the IVA. The IP who is responsible for the supervision of the IVA will be able to explain in greater detail and highlight the areas of the proposal that deals with insurance payments.

I have failed to make an IVA payment for 11 months, what will happen?

You will need to discuss this with your IP as your IVA would usually have failed by this stage. If it has not failed then it may be that it can be salvaged to protect you from pursuit until the house sells. It could be that it fails and then the house does not sell or takes a very long time to sell and your creditors may just keep chasing for all of the debt remaining during that time. It could be that there are still old PPI claims in process that mean the IVA will settle. There are too many possibilities to discuss here and your IP will be able to identify the best way forward.

What happens if I fail to make payments towards my IVA?

If you simply stopped paying your IVA then at some point it will have to be failed. After that has happened your creditors can pursue you for the debt, as they could before the IVA. There is a possibility that a creditor or the IP can take further action by petitioning for your bankruptcy.

Can my debts be written off before the 5 years?

Your IVA is in place and may be subject to terms that are individual to your arrangement. Generally, an IVA lasts for 5 years but the length of time it was scheduled to last for can differ.

There are occasions when IVAs end early and pay less than was originally proposed and agreed with the creditors. If someone loses their ability to make any future payments into the IVA and it is going to fail then it could be that a friend, or family member, gifts a sum of money to settle the IVA rather than the IVA fail and the debt still remains.

The creditors will make decisions based on the fact that they will not be getting any future monthly payments and there is no access to money from selling assets so their best chance of getting money back is to accept a settlement. This could result in the IVA finishing early, for less money and still be seen to have completed satisfactorily. It would really depend on your personal circumstances and the impact on your IVA. If you speak to your IP to see what will be possible for your situation.

How much money can I save with an IVA?

There’s an official and an unofficial answer to this question. Officially we’d say that you need to tell you IP about all changes in income. Unofficially, if you can afford to put some money away for a rainy or soon to be a sunny day in an account that is not yours it sounds like a great thing to be doing.

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Can they send bailiffs for not paying my IVA?

If your IVA is still in place then you may need to speak to your insolvency practice about making payments to this debt and how it may affect your IVA. If your IVA has completed you may need to speak to a debt adviser to establish more information about the type of business and business debt that you are struggling to pay. In general, you do not have to allow the bailiffs into the house, whether it is yours or your mother in laws property, and bailiffs will only have the ability to take into control your items. Without additional information, it would be difficult to advise on how best to approach dealing with this debt.

Can an IVA stop bailiffs?

To protect you from creditor action, such as court judgements and bailiffs, you can use an IVA. Once on an IVA. bailiffs will not be able to enter your property. Creditors can not also take you to court (except for items like Fines and Council tax). Your supervisor can deal with any creditors harassing you, while on an IVA.

Can I get a loan to pay off the rest of my IVA?

An IVA is a form of Insolvency and as such you will be taking out further debt to clear an existing debt. You can not take out additional credit without the permission of your supervisor. If you attempt to do this then they may fail your IVA.

Can someone else pay for my IVA?

The IVA is exactly what it says, it is Individual. So the simplest answer to this question could be to say that it is possible to do in some situations.

Whether this is possible, impossible, or unnecessary is not something that could be determined without looking in great detail at your proposal and any subsequent amendments. It could be that lowering the payment, extending the IVA or a 3rd party settlement are options for you and the person who can answer your questions is the IP who supervises your IVA. They can answer this question specifically to your case.

With regards to settling an IVA by gifting money. An IVA is a means of repaying the amount that is actually affordable whilst maintaining a reasonable standard of living. In most cases, the IVA would last for 5 years and then the rest of the debt would be written off. Negotiating an early settlement of an IVA by gifting a sum of money is certainly possible. It is very unlikely your creditors will object if it is clear that they will get a better return if you stayed on your IVA.

Can someone else pay for my IVA in my last year?

It can be very difficult trying to answer specific questions about IVAs as one person’s IVA may be very different from someone else’s. So the answer to this question could be yes or it could be no, it would really depend on what your drop of income means to your IVA.

In order to be completed satisfactorily, you IVA will have a set of conditions to meet. To ensure your IVA doesn’t fail you must still meet these conditions even if your income drops and you can no longer repay your debt. However, it could be that in your IVA it means that the lower payment still provides a return that is acceptable to creditors.

Ordinarily, in the fourth year of an IVA, the IP will ask whether it is possible to remortgage the property up to a loan-to-value of 85%. If you can not remortgage your property, your IVA term may be increased by 12 months (6 years in total).  This may be a possibility and it is something that you can discuss with your IP, they will be able to answer this for you with certainty.

Could my commission be taken to pay debts while on an IVA?

When your IVA proposal is prepared it is based on your monthly income and expenditure. It also makes provision for any future changes. IVA’s generally last for 5 years and it would be reasonable to expect changes to someone’s income and circumstances during that length of time.

The proposal document itself will contain the details of how commission payments, overtime, windfalls and changes to income and expenditure will be dealt with. Generally speaking, a % of the net pay will be paid to the IVA and a % will be kept in the household. I have seen many proposals from different IPs and this amount has varied over the past 5 years and 50 to 60% of overtime and commission is not uncommon.

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Can creditors take more than the original debt owed?

Your creditors cannot have more back than they were originally owed. The IVA fees, which, depending on how large your windfall is, may mean you will pay more in total than your original debt, will be in accordance with the terms of their IVA – you must speak to your IP.

I received a lump sum of cash, what should I do?

A cash lump sum, regardless of the source of the funds, must be disclosed to your IP. So to must any change in your circumstances, such as freeing up of cash due to lower or no mortgage payments. You may even be able to pay off your IVA early in some cases using this money.

If you win money or gain an unexpected amount of money, this will be taken by creditors (windfall). Alternatively, if a third-party gives you money, then this is a different matter. If it is enough for you to make a reasonable offer to your creditors. Your IP should be able to advise you further and will call a meeting of creditors to consider the offer.

What if my income rises during an IVA, will the company want more payments?

You will have an annual IVA review. In some cases, you may have a quarterly review. During this time you must submit your pay slips and P60 to your IP. Based on these your IP will know, how much income you have to pay towards your debts.

That portion varies from firm to firm. Usually between 40%-60% in my experience. Speak to your IP (or staff) about the rules of your arrangement. It should all be set out in your proposal.

However, if your income rises, quite often your expenditure does too. For example, if you do an extra shift at work it might mean that you will have to get a taxi home. You may also need a childminder etc. Another case if you’ve been promoted. Then you will need to wear suits etc. So you need to consider these things as well.

I have defaulted on my IVA payments, can I make private arrangements with my creditors?

The first thing to do if you have defaulted on your IVA payments is to contact your IVA provider. And see if there is anything they can do to help. They may be willing to renegotiate to change your IVA payments following a change of circumstances. If you are not able to continue with your IVA after consulting your IVA provider then you will fail your IVA. Once an IVA has been failed your IVA provider has the right to take you bankrupt. If they do not do this you can contact each of your creditors and negotiate payment arrangements with them. Do be aware that once you are no longer in your IVA creditors are able to carry out enforcement action to recover the money owed to them. Although they may be willing to agree to private arrangements with you. This does not prevent them from enforcement and charges in the same way that an IVA would.

Can my IVA supervisor refuse my offer of settlement?

Your IVA provider will negotiate a reduced amount with your creditors. This amount should be less than your original debt balance. It is also the amount that will be included in your IVA.

If at this stage you were to let your IVA fail you would then need to negotiate directly with your creditors about your debts. This is unlikely to be successful. Although creditors will accept reduced payments they are unlikely to settle at percentages much lower than 70-80%. Therefore it would be best to continue with your IVA payments as they are.

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Will an IVA provider find out if I come into money (windfall)?

There is no official way that IVA providers find out if a client has come into some money. However, each client will have signed and agreed to the terms and conditions and will be bound by them. The terms of the agreement will be broken, if your IVA provider finds out that you have received a windfall and not told them. Then the IVA provider has a right to take action.

When you enter into an IVA you list all your assets. They are in the appendices of the proposal. Your agreement will fail if you try to hide assets from your IP. Then you could be made bankrupt.

The most obvious way for your IP to find out would be if your creditor tells them.  IVAs are reviewed regularly. You have to submit statements for all accounts you hold. Please remember, an IP is good at spotting discrepancies. Therefore you should not try to hide assets or money in any way from your IP. At this stage, the IP is still your professional advisor and you should discuss your situation with them.

Change of circumstance with IVA, will I be able to lower my IVA contributions?

You sound like an ideal candidate for a variation. You should contact your IVA supervisor with a revised income and expenditure.

Your supervisor should then approach your creditors with a fresh proposal at a new meeting of creditors. This will keep your IVA on track and provide a better return to your creditors than bankruptcy.

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