IVA's and changes of circumstances
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The basic principle of an Individual Voluntary Arrangement (IVA) is that the debtor is willing to repay as much as they can reasonably afford during the life of the IVA (this is usually 5 yrs). This is normally a monthly payment based on disposable income (income less all reasonable household/personal expenses). An Insolvency Practitioner will help determine what that disposable income figure is.
Facing change
During the term of an IVA there may be a number of changes that affect the debtor's financial position. There will of course be some who may receive very modest pay rises which in all likelihood will simply be lost in increases in the cost of living, leaving the IVA payment level unchanged. But others face more serious financial changes.
Job changes
It may be that we change jobs or change roles within our jobs, and there are financial implications of such a change. If we receive a pay rise whilst in an IVA, we are to inform our Insolvency Practitioner (IP) about it. Assuming our expenses have not increased because of the change of job, then it will be assumed that our disposable income has increased and hence the IVA payments will increase. Similarly, we may find that our income increases through bonuses or overtime – again it is assumed that at least some of this “new income” will be made available to the IVA.
Relocating
For various reasons it may be that we need to relocate involving a change of address. If we are homeowners it is important that our IP is informed of our plans before moving, as our property and its equity is part of our IVA proposal. In fact any sort of planned move needs to be drawn to the IP's attention. It is not just the mortgage or rent that can be affected, but also council tax, utility bills, travel costs etc. If the move means we are unable to pay the agreed IVA payment level, then we will need to discuss this with our IP. If the move increases our available income, it will be assumed we can afford to pay more into the IVA.
Inheritance/Windfall
Sometimes the unexpected happens and we receive news of a lump sum coming our way. However, built in to the IVA will be a clause insisting that such a windfall will be made available to the IVA. It means that you can pay more of your debt back.
Any change of financial circumstances has implications for an IVA and needs to be drawn to the attention of the IP/IVA firm.
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