Have you been informed by your IVA company that your payments are going up? Are you facing the prospect of paying more than you originally owed? Is this allowed and is bankruptcy now a better option for you?
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Can your IVA payments go up?
Monthly IVA payments are not fixed. You may have been told that they will stay the same each month. However, this is not correct. They can, and often do go up.
If your income increases, then as a rule of thumb, 50% of any extra surplus money you get will be added to your payments. So if you were originally paying £150/mth and your surplus income goes up by £200/mth, your payments will now increase to £250/mth
Where this happens, the IVA is not paid off faster. You still have to make the same number of payments. In some cases, this can even mean you will end up paying more in than you owed in the first place.
Your IVA company will be keen to increase your payments where possible. It means that they can return more to your creditors and the fees they can charge will be larger.
Are you allowed to stop your IVA
If you are facing higher payments and will end up paying more than you originally owed, you can decide to stop the Arrangement altogether. If so, you are allowed to cancel your IVA.
Even though it is a formal agreement, if you have made up your mind, there is nothing your IVA company can do. You just stop making the payments and tell them to terminate the agreement.
Of course, if you do this you, your debt will still exist. Depending on how long you have been in the agreement, the money that you have already paid in may also be lost. The IVA company will take it to cover their fees. This means you need to have a plan in place for how to deal with what you owe going forward.
Don’t stop paying your IVA until you have spoken to us. We will advise whether it would be a sensible option for you and what your options are.
Is going bankrupt a better option for you?
Going bankrupt might sound scary. However, it can often be a better solution than staying in your IVA. This is particularly the case if your payments have gone up and you face the prospect of paying back more than you originally owed.
If you live in rented property, your home will not be affected. As long as you keep paying your rent, you can stay in the property and your landlord will not be told you are bankrupt. You will also be able to keep all of your household possessions.
Where you have a surplus income, you will still have to pay this towards your debt. However the amount you pay will almost certainly be lower than if you stayed in your IVA. The payments in bankruptcy last for a maximum of 3 years and if your partner has an income, they do not have to contribute towards your debts.
If your car is worth £1000 or less, you will be able to keep it. If it is worth more, you may still be able to keep it but you will need advice.
Stopping your IVA and going Bankrupt may not be an option if you are a property owner. Your home could be at risk. Give us a call for more advice before you make any decisions (0800 044 3194).
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert