Adding New Debts to an IVA
Forgotten a debt, or had a new one come to light during your IVA? Here’s what happens next.
See if you qualifyWhen you enter into an IVA, you disclose all your unsecured debts so they can be included — credit and store cards, payday and personal loans, overdrafts, catalogue accounts, and arrears on rent, Council Tax and utilities, plus any overpaid benefits or tax credits. Sometimes a debt gets missed, or a new one comes to light later.
Whatever the reason a debt was left off, tell the licensed insolvency practitioner (IP) who manages your IVA as soon as it surfaces. What happens next depends on a few things.
The size of the debt
If the new debt is worth less than 15% of the total already in the IVA, your IP can usually add it without consulting your creditors. If it’s over 15%, your IP must call a variation meeting and ask creditors to vote. As with the original proposal, the variation is approved if at least 75% of creditors (by value) who vote agree.
The type of debt
Benefit and tax credit overpayments are among the most common debts people add later. Provided there was no fraud, they’re handled as above. If fraud is involved, the relevant body — such as HMRC — may investigate, and any resulting fines can’t be added to your IVA.
If the debt isn’t accepted into the IVA
Sometimes creditors won’t accept the new debt and you’ll need another way to deal with it. If that isn’t possible, the IVA may fail — and your options then are more limited:
- Bankruptcy or a Debt Relief Order if you don’t own your home
- Selling a home or other valuable assets, possibly with a full and final settlement to clear the remaining balance
- Borrowing from family or friends — ideally with a written agreement
New debts taken out after your IVA starts
If you obtain credit during the IVA and then default, you’ll have broken its terms and it will probably fail. This is one of the main reasons taking on new borrowing during an IVA is discouraged.
Debts that surface after the IVA ends
It’s rare, but if a forgotten debt resurfaces after your IVA completes, the creditor is entitled to the same amount they would have received through the IVA. Contact your IP to find out how much that is.
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Free, independent debt advice is also available from MoneyHelper, StepChange, National Debtline and Citizens Advice.