“On furlough, now redundant – what about my mortgage & IVA?”

A reader, Mr D, asked:

I am being made redundant, no redundancy pay as I didn’t work there long enough.

We have managed my IVA payments when I was on furlough by taking a mortgage holiday but that is ending and now our household income will be halving. We will struggle to pay the mortgage let alone the IVA. My partner earns too much for me to get any benefits.

I know I have to tell my IVA, but what should I ask for? I have just started my fourth year.

IVA options

Mr D is right that he needs to tell his IVA firm about his situation. This should be as soon as possible, there is no reason to delay and it probably won’t be as difficult a conversation as he may think. Many people are in a similar situation and IVA firms will be doing their best to help them get through it.

He should be able to easily get a break in his IVA payments – this is what he needs to ask for at the moment. If he hasn’t had one before, most IVAs let you have a 9 month break. Even if he has already had a payment break, new Coronavirus rules may mean he can get a further one.

If Mr D gets a job during this break he can restart his IVA payments. If his new job pays less, he can ask for his IVA payments to be reduced because of this.

At the end of the agreed payment break, if he thinks he will get another job with a bit more time, he could ask for a further extension.

But if there is little prospect of a job at the end of 9 months, he could also ask for his IVA to be completed “on the basis of funds paid to date”. Then his IVA finishes properly, it doesn’t fail. His creditors will be asked to agree to this – they don’t have to but they may decide to as he has already paid three years of payments and he has been trying to get another job.

Check about benefits

Mr D can use a benefits calculator to see what help he can get. “Means-tested” benefits will depend on how much his partner earns and whether they have any children.

But even if his partner earns too much, he may well be able to get “new style JSA” if he has paid enough NI contributions. You can still get this whatever your partner earns or even if you a lot of savings. It’s only £74 a week and it only lasts 6 months but it’s better than nothing!

As he has a partner still working, he won’t be able to get any help from the benefits system with his mortgage payments.

(If he didn’t have a partner in work, then he would be able to get some help with his mortgage after he had been on Universal Credit for 9 months.)

Mortgage – the top priority

If his partner’s income isn’t enough to pay the mortgage and other essential bills, they need to talk to their mortgage lender about what help they could get. It is best to do this soon, not wait until arrears have built up.

The FCA, who regulates mortgage lenders, decided in November that people can only have mortgage payment breaks for 6 months.  If you haven’t yet used up your 6 months you can still get another break.

After you have had 6 months break, the FCA says you need “more tailored support”. So Mr D’s lender should look at his whole situation, including his other debts and essential living costs.

There may be different options, depending on their situation and the lender. For example, it may be possible to switch to only paying the interest on their mortgage for a while.

A good debt adviser can help them draw up a budget to show the mortgage lender and work out what their priority bills are. For example if Mr D’s partner has credit cards or other non-priority debts, it may be good to only make token payments to them, leaving more money for the mortgage and essential bills. See Can’t pay your mortgage now breaks are ending for more details about this.

I suggest they contact their local Citizens Advice.

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