Payments in an IVA
When considering an Individual Voluntary Arrangement (IVA) as a solution for your debt, it’s essential to understand how much you will be expected to pay and whether it’s affordable for you. The good news is that IVAs are designed to be tailored to your individual circumstances, ensuring that the monthly payments are manageable while helping you get your debt under control.
Let’s take a closer look at how IVA payments are calculated and what factors will influence your repayment amount.
How Are IVA Payments Calculated?
One of the main benefits of an IVA is that your payments are based on what you can afford, taking into account your income and your living expenses. Your Insolvency Practitioner (IP) will work with you to determine a realistic repayment plan, through an income and expenditure, ensuring that the monthly payment is sustainable throughout the term.
In general, the more disposable income you have (after your typical expenses like rent, utilities, food, hobbies, travel etc.), the higher your monthly payment will be. But even if you have limited income or higher living costs, the IVA will be structured to suit your budget, with your creditors agreeing to accept what you can afford.
What Happens if My Financial Situation Changes During the IVA?
Life can be unpredictable, and your financial situation may change during the IVA term. Whether it’s a change in income or unexpected expenses, it’s important to know that your IVA payments can be adjusted to accommodate changes in your circumstances.
If your income increases, your payments may be adjusted to reflect your new financial situation. However, if your income decreases or you face unforeseen expenses, your Insolvency Practitioner can work with you to reduce your payments or even pause them temporarily. This flexibility ensures that your IVA remains manageable, regardless of the changes that life may bring.
How Much Will I Pay Over the 5 Years?
The total amount you pay during the 5-year IVA term depends on the monthly payment you can afford. For example, if you owe £20,000 and your monthly affordable payments are £100, you will typically pay back £6,000 over the term of the IVA. The remaining debt - in this instance 70% - would be written off upon successful completion of the term.
What Are the Benefits of IVA Payments?
Some of the key benefits of IVA payments include:
- Affordable Payments: Your monthly payments are based on your financial ability, so they’re manageable and realistic.
- Debt Write-Off: Once the 5 years are up, any remaining unsecured debt would be written off, offering you a fresh start.
- No Interest or Charges: During the IVA, interest and fees are frozen, so your debt will not continue to grow.
- One Monthly Payment: The IVA consolidates your debts into one affordable monthly payment, giving you peace of mind.
The IVA payment structure ensures that you’re not paying more than you can afford, giving you peace of mind and a clear path to becoming debt-free.
Are You Ready to Find Out If an IVA is Right for You?
If you’re unsure how much you’ll need to pay in an IVA, our friendly advisors are here to help you understand your options. We’ll work with you to assess your situation and explore whether an IVA is the right solution for your debt.
Contact us today to learn more and take the first step toward a debt-free future.