IVA Payments
Getting an individual voluntary arrangement (IVA) can save many people from more serious debt issues like bankruptcy for example.
To start an IVA requires knowledge of the entire process, and a very important part of this process are the payments. Since you need a licensed insolvency practitioner to start the whole process, he will calculate how much you can afford to pay monthly.
Paying an IVA is very similar to repaying a loan: you have to make a single monthly payment, but you do not have to direct it towards your creditors, you have to send it to the insolvency practitioner and he will divide the amount between the creditors in the agreed percentage.
Although the amount of the payments is decided at the beginning of the IVA, they might slightly change during the time. This may happen in case your income increases or decreases. It is important to mention that whenever your income changes, you have to notify the insolvency practitioner, who will then calculate a new payment schedule. It comes naturally that if your income increases, you will be able to afford paying larger amounts, so the term of your IVA might become shorter than it was decided initially.
In case your income decreases, you will make smaller payments, but this might also make the IVA last somewhat longer. In case your income does not change significantly during a year, you do not have to notify the insolvency practitioner, since he must conduct a yearly review. In case he will notice any significant change during this review, he will calculate a new payment schedule. As it is normal, creditors must approve any kind of changes, but this usually does not represent a problem.
Just like in the case of any other loan, in case you get a lump sum, you might complete the IVA earlier than the term. The insolvency practitioner will have to hold a new creditor’s meeting because they have to approve early repayment, but this does not represent an issue, since creditors are usually happy that they got their money back earlier than the original terms.
The opposite case might happen too: in case your income is reduced drastically and you cannot afford to make the monthly payments, you have two options, but in any way you must notify your insolvency practitioner as soon as you can! Then he will decide between one of the two following options. The first choice is to negotiate with the creditors again, and try to reach an agreement which allows you to make smaller monthly payments at least for a few months until your income increases again, if not for the whole term of the IVA. The second option is to take a few months out of the payment. This step is taken only if the debtor becomes unemployed or his income is drastically reduced. If you end up in this situation, you should know that you will have to make payments for these missed months, but they will be tagged on the end of the IVA.
In case you are only thinking about an IVA and did not started to process yet because you are not sure that you could afford the monthly payments, you should calculate yourself. There are many specialized websites on the internet which can help you. All you have to do is to introduce the amount you owe, and the site will calculate the amount you would have to pay. If you want to use such a calculator, you should keep in mind that the common term of an IVA is five years, so websites calculate payments for this time period.
You should take into account that the amount you see on your screen will only be estimation, and the final payment amount might slightly differ, depending on your financial situation but also on the composition of your debt. If you want to be sure, you should talk to an insolvency practitioner or at least ask for advice online. Specialized people will answer all your questions and they will also be able to give you an exact number based on the data you provide them.
It is very important to understand how the IVA repayments work, and what are the situation s their amounts might change. Also, if you think that you cannot afford an IVA, you should ask for professional help, because websites might not take into account your real financial situation, but insolvency practitioners and creditors do, so the amount of your monthly payments may be really low. Starting an IVA can really help you when you are struggling with debts, so do not hesitate and ask for professional help if you see that you cannot cope with the situation. Make sure that you understand everything your insolvency practitioner tells you, with emphasis on the payment methods and the amount of the payments. All these terms should be set in your IVA proposal, so make sure you read it carefully and if you do not understand something, ask your insolvency practitioner!