An Individual Voluntary Arrangement (IVA) can be a great way of taking care of your debts.
However, it can get confusing to work out what your monthly IVA repayments will look like as you have to strike a balance between what you can afford and what your creditors will accept.
In this post, I’ll be looking at how to devise an appropriate payment plan for your IVA and how you can make those payments reliably.
How do I Devise My Individual Voluntary Arrangement Payment Plan?
Your insolvency practitioner will help you devise an appropriate payment plan for your IVA so that you can easily make your monthly payments each time.
You will most likely have to fill out an income and expenditure form which will help your insolvency practitioner determine how much spare income you get each month.
Always make sure to be completely honest with your IP about your expenditures as well as your income. Not only is withholding or giving out wrong information against the rules of an IVA but it may also result in the IP making a plan that doesn’t work for you.
Please remember that your IP is on your side and will do all that he/she can to make sure that the monthly repayments you have to make are manageable and affordable to you.
It’s important to note that if you have equity in your home, then you may be required to remortgage your house in the final year of your IVA . Ask your IP for more advice and information on this.
If you don’t own a home or can’t take out a remortgage for some other reason, then the term of your IVA may be extended to six years instead of the typical five.
How do I Make My IVA payments?
Most IVA firms will not charge you any fee for providing you advice before your IVA is set up.
However, once your IVA has been approved and put in place, then there will be costs for running the IVA such as your IP’s fees.
Please note that all additional costs are included within your monthly payment every time so you don’t have to pay anything apart from that.
Please make sure you are aware of all the costs involved in an IVA before you opt for one.
Paying via Direct Debit
Most IVA firms will collect your monthly payment on a set date of each month. This is typically either the 1st, the 10th or the 20th of every month.
Please note that if there are any changes in your monthly repayments, then your IP will handle it and amend your Direct Debit. Thus, you will not have to contact your bank to make any amends yourself.
If you’re having trouble making payments for any reason, it’s essential that you contact your IP immediately.
You can discuss your situation with your IP and the reason why you’re unable to make your monthly repayment. Your IP will then discuss options with you and make amends to your payment plan.
It’s very important that you communicate your situation with your IP whenever you run into any difficulty.
Not making contact and missing payments will most definitely lead to your IVA failing.
What Will Happen if I Miss an IVA Payment?
If you fail to pay back a monthly repayment three or more times over the course of the agreed-upon duration without any notice or approval, then you will be given a month to repay the arrears.
You have two options: Either repay all the money you owe or ask your IP to talk to your creditors and make amends to the terms of your IVA.
If you do not make any attempts to rectify your violation of the terms of your IVA, then your IVA may fail.
Will I be Paying the Same Amount of Money towards My Individual Voluntary Arrangement Each Month?
This depends entirely on your financial situation.
At the end of each year, an annual review of your financial circumstances will be conducted by your IP.
This doesn’t normally take too long. Again, it’s very important that you are completely honest and transparent with your IP when discussing your finances with them. Be sure to mention all essential expenditures as well as all sources of income.
If your financial circumstances are the same and have not changed, then it’s most likely that your monthly repayments will not change and your payment plan will remain the same.
However, if they have changed, then your payment plan may be amended to compensate for those changes.
If your financial circumstances have improved, then your payment plan may be amended so that you will be paying more in terms of your repayments each month.
If your financial circumstances have worsened, then your payment plan may be amended so that you pay back a lesser amount of money each month.
How Much Money Could I Potentially Save if I Enter into an Individual Voluntary Arrangement?
You can use an IVA calculator to get an estimate of how much money you’ll be saving by entering into one.
Please note that while IVA calculators are a decent way of getting an estimate of how much you’ll save when you owe money, it’s not something you should rely on completely.
When you enter into an IVA, your interest is frozen which means you’ll definitely be saving a lot of money that you would have otherwise been paying in the form of interest.
That being said, you should definitely seek advice from a professional about your debts before you apply for an IVA.
Remember that there are other debt solutions besides an IVA as well and depending on your situation, may be some of those other debt solutions might be better suited to you.
How can I Keep My IVA Payment Plan on the Right Track?
It can definitely be overwhelming when you’re first starting out with your IVA.
You may be worried about your monthly repayments and sticking to a budget.
Here are some tips you can keep in mind which will help you keep your IVA on track:
Go Through Your Review Letter Thoroughly and Budget Accordingly
Your payment plan was devised after you consulted with your IP and made them aware of your expenditures and income.
Go over your review letter carefully in order to understand what your payment plan looks like and manage your money accordingly.
Keep an Eye on Your Budget
Even after your IVA has been approved, your budget can definitely fluctuate due to unexpected expenses.
Make sure you keep an eye on any fluctuations in your budget and plan accordingly.
Communicate with Your IP if You’re Struggling with Payments
Please remember that unexpected circumstances arise. That’s a part of life. An IVA lasts for five years and it’s quite likely that you will run into some unexpected expenditures at least once in those five years.
If this happens, it’s essential for you to get in touch with your IP and inform them if you’re going to have trouble making the payment for that month.
Your IP will discuss what options you have and give you guidance on what approach you should take moving forward.
Inform Your IP of any Tax Rebates
As I said earlier, withholding information is against the rules of your IVA.
Please be honest with your IP about any unexpected money such as a tax rebate or any other windfall that you may receive.
Your IVA is a formal and legally-binding agreement and if you fail to disclose such information, then it may fail.
Manage Your Paperwork Carefully
When it comes to managing your debts and your IVA, you’re going to have to provide proof and documentation which will usually be in the form of documents and official papers.
It’s a good idea to file and submit them as soon as you can so that they are easier to refer to.
The more documentation and proof you provide, the stronger your case will be.
Keep Emergency and Unexpected Expenditures in Mind
When you’re devising a budget, always make sure to set some money aside for unexpected expenses.
If you start ignoring this part of your budget, then you may find it much harder to manage your money when such an expense does arise.
Never Pay Creditors Outside the Terms of Your IVA
Please note that your creditors are bound by the terms of your IVA. Creditors are not allowed to ask you for money separately from your IVA.
If a creditors is contacting you and asking you for extra money, you should inform your IP of this immediately.
You should not be worrying too much about letters from your creditors as these are usually just mere statements.
If you get a letter from a creditors or creditors in which they are threating to pursue some sort of action against you, you should inform your IP of this.
It can definitely seem overwhelming to devise a payment plan and budget for your IVA.
However, your IP will definitely help you devise it in a way that is affordable to you and acceptable to your creditors.