What is a Debt Relief Order and how does it work?
Find out which debt solution is right for youGet started
Answer a few simple questions
See if you are suitable
Understand your next steps
Your IVA annual review will make sure your debt solution is on track but what should you expect?
When you start an Individual Voluntary Arrangement (IVA), it’s likely to feel like a huge relief. You finally have a plan to get your debts under control and, as long as you stick to the terms of the IVA, you’ll have a date when you’ll be debt free.
During your IVA, you’ll have a review with your IVA provider at least once a year. It’s so your provider can check your IVA is still on track and see if your circumstances have changed at all. Don’t worry – your IVA supervisor will be in touch throughout your debt solution to check that everything is still okay and you can get in touch at any time if you’ve got any queries. If you earn any more than expected, your IP will have a review with you every six months to see how the extra money affects your IVA.
Not sure what to expect in this annual review? We’ll take you through what you’ll need to know beforehand.
Preparing for the review
In your annual review, your provider is mainly looking to see that your income and expenditure haven’t changed. Don’t worry, they’re not trying to catch you out with this – they just want to see that your original IVA agreement is still right for you now.
Before the review, your IVA provider will send you a copy of your most recent income and expenditure breakdown.
You’ll be able to see the amount you were earning at the start of your IVA and tell whether it’s changed or not. If you’ve been on your IVA for longer than a year, you’ll be looking at the amount you were earning at your last IVA review.
In the same way, you can review the amounts you originally budgeted to spend on various essential bills and expenses. These will include your energy bills, any insurance payments and your mortgage or rent. If these have gone up or down in the previous 12 months, you should mention this too.
The annual letter you get from your IVA provider will ask you for up-to-date proof of your current income and expenditure. If you don’t provide these, it will count as a breach of your arrangement.
What you’ll need
Your provider will contact you before your IVA annual review to tell you what you need to have ready. They’ll usually ask for your bank statements, bills and payslips. This is so they can see whether your income and expenditure have changed and if they have, by how much. Your IVA provider will let you know when they need you to send them these documents but it will be before your annual review. This is so your provider can have a chance to look at them before they speak to you.
They might only ask for the last three or four months of statements but they could ask for your paperwork from the last 12 months. If you’re just starting your IVA, it’s a good idea to put all of your bank statements, bills and payslips in one place. That way, when your IVA annual review comes round, they’ll be easy to find.
During your annual review, your IP will go through an income and expenditure sheet with you to see if anything’s changed. They’ll use the paperwork you’ve provided as evidence of what you’re earning and what you’re spending. If nothing’s changed, your IVA payments will carry on as normal. But if your income has gone up or down, or you’re spending more on the essentials, they might consider changing your payments.
Will your payments change?
If your income or essential spending has only changed slightly, it’s unlikely that your provider will change your IVA payments. But if you’ve had a more substantial change in circumstances, they could change what you pay. So, for example, if you’ve had a pay rise, got a better paid job or your income has increased for any other reason, you might need to put more towards your IVA. The rule is that half of the increase in your Disposable Income will need to go into your IVA, so whether you need to pay any more in will depend on whether your bills have also increased. If they have and your Disposable Income has stayed the same, your IVA payments won’t change.
The same is true if your income has dropped – like if you’re getting fewer hours at work or you were working two jobs and now you’re only working one. You might be able to pay less each month. How this works exactly will depend on how much your circumstances have changed.
For payment reductions of up to 15%, your IP might be able to reduce your monthly payments, as long as you can provide evidence of the change in your circumstances. If this is the case, they won’t need to speak to your creditors – they’ll just change what you pay. Your IP will review your payment amount periodically to check you can still afford what you’re paying.
But if you need to cut your payments by more than 15% because your situation has changed more dramatically, your provider will need to get your creditors’ approval. This means they’ll need to call a variation meeting with your creditors to show them your income has gone down. It’s then up to your creditors to decide whether to accept these changes to your monthly payments. If they do, they might need you to pay into your IVA for longer than you originally planned.
If your creditors don’t accept the changes to your IVA payments, you can either continue with your payments as normal or get your provider to reduce your payments by up to 15%. If neither of these options are suitable for you, you could have to consider a different debt solution. None of this should be cause for worry though. If your circumstances have changed in anyway, your provider will work with you and your lenders to make sure that your payments remain affordable.
If you need advice
Don’t think that you need to wait until your IVA annual review to let your provider know about any changes to your circumstances. If you lose your job, go on maternity leave, or your benefits change, contact your provider as soon as possible. The longer you leave it without letting them now, the more the changes are likely to affect your IVA.
You don’t have to worry that any changes to your income and expenditure will make your IVA unaffordable – you’ll only ever pay what you can afford. If you’re considering taking out an IVA and you’re looking for advice on what life on a debt solution is like, you can speak to one of our expert advisors using any of the options on the left of the page. Or, if you prefer, you can get free and impartial information from the Money Advice Service.
by Emily BancroftBack to blog home