An IVA is binding on all the creditors for the debts included in the IVA – but what happens if a debt is accidentally forgotten at the time, or only later emerges? If this has happened to you, you are going to need to talk to your IVA firm about your situation because IVAs can be very “individual”, but this article looks at what commonly can be done.
First I’ll look at the usual case where a debt emerges during the IVA, then the less common scenario of a debt appearing after a completion certificate has been issued.
How big is the debt?
Your IVA will have discretion to add additional creditors or higher creditor balances of up to 15% without asking for creditor approval. So if an extra creditor emerges but the new debt is less than 15% of the debts already in your IVA, then it can usually simply be included in the IVA.
If the debt is larger than this, it can’t be added unless the creditors already bound by the IVA agree, so a variation meeting will be called. A variation is usually just to include the new debt, but it is also possible for the term of the IVA to be extended.
You might wonder why the creditors would agree to take less money. But most variations are accepted – creditors know the alternative is usually having the IVA fail.
Does this include benefit overpayments?
Benefit overpayments are a common reason for a new debt emerging, as they were often not known about when the IVA was set up. The overpayment can be included in the same way as any other debt unless the creditor (the DWP, HMRC or the Local Authority, depending on the type of benefit) has decided that, or is investigating if, the overpayment resulted from fraud. Fraudulent debts cannot be included.
What are your options if a debt cannot be included?
If the new debt can’t be included, one possibility is to negotiate a repayment plan with the new creditor outside your IVA. However frequently you can’t afford to pay both the new creditor and make the IVA payments, so your IVA is likely to fail.
If your IVA fails, you often don’t have any good options:
- if you don’t have a house, then bankruptcy (or a Debt Relief Order – if you are renting and you meet the other criteria) is the most likely solution.
- if you have a house and there is no equity (or someone such as a relative could buy your equity from the Official Receiver), then bankruptcy is worth looking into.
After the IVA has completed
It is very rare that a creditor that should have been included in the IVA emerges after an IVA has finished and a completion certificate has been issued. If this does happen, the Insolvency Act says:-
(2A) If—
(a) when the arrangement ceases to have effect any amount payable under the arrangement to a person bound by virtue of subsection (2)(b)(ii) has not been paid, and
(b) the arrangement did not come to an end prematurely,
the debtor shall at that time become liable to pay to that person the amount payable under the arrangement.
Basically the debtor is responsible for paying the creditor the amount they would have been awarded in the IVA. Your IVA firm will be able to tell you what this amount is.
Avoiding this sort of problem
When your IVA is being set up, it is important that you make every effort to list your debts. There are no advantages to leaving a debt out and later trying to have it included – it may cause your IVA to fail, in which case you still have all your original debts with the addition of the IVA fees.
If your paperwork is in a mess and you are not sure about some debts then you need to try to find as many as possible and discuss any areas of uncertainty with your IVA firm:
- check your credit records with all three credit reference agencies – Experian, Equifax and TransUnion – because not all lenders report to all three agencies.
- if you think some debts are statute-barred, tell the IVA firm you are talking to.
- if you are having any benefit problems at the moment, tell the IVA firm.
Do you have a plan for your IO mortgage?
Change from an IVA to a DRO?
How equity release works in an IVA
Diana says
Hi I’ve been contacted by a debt company saying I owe them nearly £6000 I had an iva 8 years ago and this debt was put on it, they have told me I owe it because it is front loaded interest!!! Am I liable for this or should it have been all on the iva, I’ve had no contact about this until 3 weeks ago, I’m really confused and upset by this please can someone help me?
Sara (Debt Camel) says
Hi Diana, you need to talk to your IVA firm about this. It sounds as though the whole debt should have been in the IVA. I hope this will be pretty simple to resolve.
AB1015 says
Hi Sara,
I have had a smooth running IVA up until now. I am 2 months of my last year which should finish next March.
I took the iva out in 2012 and was paying £103 back then and money was tight. I had a house with a secured loan on it and there wasn’t enough equity to sell it and pay them off, so in the circumstances I was in, my only option was to hand the keys back to the mortgage lender and voluntarily be repossessed. A big decision but turned out not too bad. This then released a lot more disposable income and I found my payments to the iva were now £650 per month. But also at that time I had a creditors meeting to now put my secured loan which was now classed as unsecured into the iva which they agreed as long as I paid another year of payments. This is where I now need advice. I apparently signed a form back then to say I would continue to pay £650 in the last year as a modification to have this loan agreed to by my creditors. That was in 2014. So every year without hitches, I’ve completed my annual reviews which having moved and finances changing, I’ve been paying £440 last year and my annual review was settled at £455 starting last month. All fine until I get a letter saying I only partly paid them and now in arrears. I must pay the arrears. Checked my iva online which shows my payments set at the said £455 but I rang them and they said because I signed this form in 2014, it still stands that I should pay that amount on that form which is £650? How can they do this? I thought that was the whole point of reviews on what I can afford and they said it was £455. Now they are pulling this out the archives with no mention to me to inform me or even tell me at my last review. The first I knew of it was the arrears letter. I am so angry that they didn’t inform me or mention it in some way and I thought my last year would be based on what they’ve said I can afford now. They’ve now taken most of my permitted income away to reap this extra £200 from me. Have I got any rights to complain about this? Thank you in advance. Alison
Sara (Debt Camel) says
What a shame you didn’t go bankrupt at the start. It would all have been over by now.
Have you asked your firm if they can extend your IVA to allow you to repay the extra?
AB1015 says
Hi Sara,
Just logged back in. I’m paying the £650 now till it ends in March 2018. I suppose I didn’t want to go bankrupt as it felt an Iva was more acceptable for my personal circumstances at the time career wise etc. 8 more payments to go and I hope that is the end of it! I just feel like my confidence in my IVA company has nose dived now after the farce of my last review and I’m just waiting for them to pull something else out of their bag of tricks!
If I’ve already completed PPI claims at their request and that was completed in 2013, and they know I do not own a house so no equity release and the secured loan transformed into an insecure loan and modified my plan which led to this last year of payments (taking 5 year IVA to 6), is there anything else they could come up with to trip me up at the final hurdle? I’ve not had a payment holiday, paid in full every month and given all documents upon request at every review.
Thank you.
Alison
Sara (Debt Camel) says
Well lots of things can happen in an IVA – redundancy, inheritance etc – but you are close to the end so I hope the rest goes smoothly for you.
Nick Murray says
Hi.
My IVA company have added a debt to my IVA that isnt mine and have done so outside of the agreement and failed to tell me they have done this.
The ‘debt’ is monies my father in law gave my wife and i through our marriage. We are going through a messy divorce and all of a sudden these monies have become my debts. Can this be done? The monies were a monetry gift and no contracts etc were signed…surly this is not allowed? Please help
Sara (Debt Camel) says
You can complain if you feel these debts were not yours.
miss power says
hi my iva finished on the 1st April 2019 however i am being told the team can not complete my iva due to the debt claims received is 15% over the advised claims advised at the start of the iva in 2013 six years ago because a creditor was added 3 months after the start of the iva however no one advise there would be a issue throughtout the six years and they state they need a meeting with the creditors before proceding as i may have to pay more is this correct as seems unfair when i have done as asked for six years, plus harrington brooks did mot advise this to me before merging in to freeman jones can you offer any advise please
Sara (Debt Camel) says
It’s pretty normal for an IVA to be extended when a creditor is added. But this should have benn sorted the time.
charlie says
I have just looked over my IVA agreement. I knew id not signed anything and some debts have been missed! looking over my agreements its clear to see that its not my signature that has signed the forms, still my IVA provider is taking £100 a month and i still have creditors contacting me? I have spoke with my IVA provider since and the short and brief email i received was to talk to them providers, which i was under the understanding they would have already done?
where do i stand as i`m sure this is fraud? surely?
Sara (Debt Camel) says
Are you saying that you talked about setting up an IVA but never actually agreed to it?
How long ago was it set up?
How large were the debts in your IVA? How large are the debts that were missed off?
Are you buying or renting? Do you own a car – how much is it worth?
Are the £100 payments affordable or are you now in difficulty because of rising prices?
Bill says
Hi,
I have an IVA agreement for just over £25,000. I currently have a car on finance which is around £360 per month finance payments which I am struggling to pay each month. The settlement for car finance would be around £9500 that of course is without interest. As it stands I have a total of around £17000 to pay off on the car but that is including the interest.
Hypothetically speaking, if I round up the settlement figure to £10,000 and I let the finance company take it back and auction it, and the car was sold for say £6,000. I’d then have ‘£4000’ left to pay/debt though the finance company. Could this be added to my IVA using the 15% margin? Or is there anyway that I could add the car in full to the IVA (either keep or return) or is there any other options?
Thank you.
Sara (Debt Camel) says
Can you say how large your IVA payments are at the moment? When the IVA started and is it 5 or 6 years?
The car finance, how much did you borrow (excluding interest?) How much have you paid to date?
Bill says
£160 per month IVA repayments over 5 years which started 2 months ago.
The car to buy outright would have been £10,499 and the amount borrowed was around £18,000 and I have payed around £3,600 up to date as the car was taken out on finance last August (2021).
Thank you.
Sara (Debt Camel) says
Sorry I should also have asked:
is a car essential for you?
are you buying or renting?
Bill says
I do need a car but may borrow one from family for commuting.
Many thanks
Sara (Debt Camel) says
and are you buying or renting?
Bill says
I’m in the military so on base.
S H says
I have 3 more payments left on my Iva but a new debt has come of 691.13GBP. I’ve paid my Iva 5700 so far can I add this debt or what can I do
Sara (Debt Camel) says
This is very late on. You need to ask your IVA firm what the options are.