Are IVA payments fixed? 2 February 2012
James Falla (about the author)

If you start an IVA, we ask whether your monthly payments will remain fixed or whether they could change for any reason.

One of the attractions of individual voluntary arrangements (IVA) is that if you are struggling with your debts an IVA will allow you to reduce your monthly payments so that they fit into a single affordable amount.

In a standard IVA debt solution your monthly payments will last for a fixed period of five years. After your final IVA payment (notwithstanding that homeowners might have to release equity), any debt that is left outstanding will be written off and you will be free of your unsecured debts.

The amount of the payment that you make into your IVA will be agreed up front with your creditors before your IVA starts. After your creditors accept your IVA proposal, they cannot go back on the deal and ask for more money.

In this sense the payments you are required to make into your IVA are fixed. However there are still some reasons why the payments you make might change while your IVA is in place.

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Change in income

When you start an individual voluntary arrangement, one of the conditions that you agree to is that if your income improves for any reason and your disposable income increases, you will then increase your IVA payments.

This condition does not mean that your IVA payment will automatically increase by the extra amount that your income has improved by each month.

Your income and expenditure budget will be reviewed and any increase in your living expenses associated with your increased income will be taken into account first.

So for example if earning your increased income means that your childcare costs increase, you will only be expected to increase your IVA payments by the amount left over once the additional childcare costs are covered.

Of course, this condition of your IVA works both ways. If your income falls through no fault of your own, it is possible to reduce the payments that you make into your IVA.

However the opportunity to reduce your monthly IVA payments will always depend on whether your IVA will still remain financially viable. If your payments fall below a certain amount this may mean that it is impossible to continue with the IVA and it will fail.

Change in living expenses

The amount that you pay into your IVA is largely dependent on your monthly IVA living expenses.

In the same way as if your income were to change, a change in your living expenses could mean that your IVA payment will be revised up or down.

If your living expenses fall, you will be expect to pay the amount saved each month into your IVA meaning that the overall amount that you pay back to your creditors will increase.

The most common example of this is when a car hire purchase agreement comes to an end. You will then be expected to transfer what you were paying to the HP company into your IVA for the remaining months of your IVA.

If your living expenses rise for a specific reason, then in the same way as if your income had fallen, it may be possible to reduce your IVA payments so that they are more affordable.

Generally speaking to gain agreement for your IVA payments to be reduced, the reason behind the increase in our living expenses must be tangible.

For example if your job location changes and it becomes more costly to travel to work this is a clearly measurable increase in living expenses. However it is unlikely that you will be able to simply reduce your IVA payments because of a general rise in the cost of living unless you can prove that your circumstances have been specifically affected.

IVA payment extensions

The time that you will pay into your IVA debt solution will be agreed at the beginning of the arrangement. Generally speaking this will be for a standard period of five years (60 months).

This IVA payment term is normally fixed however there are some circumstances where the period might be extended.

One of the most common reasons for an IVA to be extended is that during the arrangement you agree with your insolvency practitioner (IP) that you will take a payment holiday. A payment holiday may be agreed by your IP to get you through a period of unemployment or other financial crisis.

The months of IVA payments that you miss due to a payment holiday will normally be added to the end of your IVA thus extending the length of time that you will have to pay.

Your IVA might also be extended if you have to reduce the monthly payments that you make because of a reduction in income or increase in living expenses. Your creditors could ask for this extension to ensure that they are repaid the same amount overall.

In addition to making up payment holidays, standard IVAs can be extended for up to 12 months in lieu of equity in your property which cannot be released because a remortgage is not available.

Expect to pay as much as you can into your IVA

The golden rule to remember with individual voluntary arrangements is that they are a way to repay as much of your debt as possible in a controlled and sensible way.

It is true that the amount you are expected to pay into your IVA will be agreed up front. If your circumstances do not change then your IVA payments will remain the same.

However it is important to understand that if you do have changes to your income or specific changes to your expenditure it is certainly possible that the amount you pay into your IVA will change accordingly.

Related IVA articles

If you are interested in reading more news and expert articles about IVAs, please click on the following link:

http://www.beatmydebt.com/forum/viewforum.php?f=50

What to do next

If you are struggling with debt and are considering an IVA, visit www.beatmydebt.com

Our experts are available to speak to you about the IVA problem and offer further help and advice.

Our vibrant debt forum gives free access to experienced industry experts and others who have suffered with debt problems and have been through the IVA process themselves.

Useful guides, calculators and information are also available designed to help you understand how to manage and resolve debt problems.