Forgotten a debt, or had a new one come to light during your IVA? Here’s what happens next.
May not be suitable in all circumstances. Fees apply, read more. Your credit rating may be affected, read more.
An IVA is a formal insolvency procedure. It must be approved by your creditors, stays on your credit file for six years, fees are taken from your payments, and debts are only written off if you complete it. It isn’t right for everyone.
When 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.
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.
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.
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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:
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.
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.
See which debt solutions you could qualify for.
