Overpaying by thousands on IVA?

Justdreav

Hi all, I need help understanding my options with my IVA.

I took out an IVA with creditfix in July 2020 (my IVA then moved to Ebensgate months later) my debt total £13,248, I had no assets to my name. My monthly wage at the time was £1600. 

I agreed to pay back £90 per month over 5 years = £5400 total.

My circumstances have since changed, in June 2023 I was made redundant and received a redundancy payment.

i have paid £10,000 of my redundancy into my IVA, and up to today I have made a total of 51 payments x £90 = £4590. Therefore, as it currently stands I have paid a total of £14,590. 

I became employed again in March 2024, with a pay increase. Ebensgate are now telling me I must increase my payments from £90 to £311 until July 2025 with possibly extending to July 2026 to cover fees and interest on my debt meaning I could end up paying over £21K against my original £13K debt. This really doesn’t feel right to me and is causing me stress. 

I have been given advice independently to cancel the IVA, save per month until it’s officially cancelled and pay off outstanding amount to my creditors directly. The logic being that once ebensgate minus their fees from the £14590 I’ve paid then I will just have to pay what’s outstanding directly to creditors.

Any advice here? I feel like I am being majorly penalised for paying off my full debt! Has anyone else been in this situation? 

sammyjammy

I'm sure many have been in these circumstances, it sounds as if an IVA was wholly inappropriate for you regardless of what happened after you took it out.  The fees associated with IVAs can be eye watering.  I wouldn't want to get into recommendations but you certainly can stop paying and let it fail although you maybe be unpleasantly surprised by how much you still owe to those creditors.  You could let the IVA fail and save some money for full and final offers.  Letting the IVA fail will take some time.

fatbelly

You are being treated according to the agreement that you signed up to, probably.

You are welcome to challenge any item that you don't understand and ask for further explanation.

Should you decide to stop paying the IVA, you may be told that your IP can petition for your bankruptcy. This is correct, but hardly ever happens.

It is hard to say what might be the least expensive route. Potentially you only have nine more payments to make to the IVA, and as said above, your 13k debt may still be around that figure if you lose the protection of the IVA

You were probably missold this product. I would give clearer advice if you hadn't already made 51 payments to it.

ManyWays

with possibly extending to July 2026 to cover fees and interest on my debt
Can you ask them to explain this in writing? I am not sure why your IVA would have to be extended unless you have missed payments? 

sourcrates

Whilst you were unemployed you presumably missed payments?

The redundancy money would have been taken under the windfall clause, and would be taken as well as the contributory monthly payments that were due, which I assume you didn`t make at the time due to you being unemployed.

Any missed payments must be made up, they don`t give you a free pass, so that would likely be the reason for the extension.

What people fail to realise is that when circumstances dictate they make a windfall payment, the possibility of paying the full amount of the original debt, plus the IP fee`s and expenses becomes all too real, I suspect that is what is happening here.

Your not overpaying your IVA, your debt was around 13k, your IP`s fee`s will vary, but the average cost will be:

Nominee’s fees	£1,272.00
Supervisor’s fees	up to 20% of the payments made under the arrangement.
Supervisor’s costs	£950.00

interest/VAT/and sundries, plus disbursement fee`s for distributing payments to your creditors, so that looks about right to me, you only pay back less that is owed in an IVA if your circumstances remain the same as at the outset of the arrangement, and yours didn't, common misconception with IVA`s.

ManyWays

sourcrates said:

Whilst you were unemployed you presumably missed payments?

The redundancy money would have been taken under the windfall clause, and would be taken as well as the contributory monthly payments that were due, which I assume you didn`t make at the time due to you being unemployed.

It's normal for the redundancy money less 6 months take home pay to be taken, so the debtor has the ability to carry on as normal for 6 months including paying the IVA. And @justdreav says they have paid 51 payments which sounds like up to date? 

Tractorfan22

I’m interested in this I can pay mine off but they are asking for 8k in fees! Is this right? 

RAS

Unfortunately, yes.

What people often don't realise is that if they get a windfall they can end up repaying the entire debt plus the fees.

One of the reasons Stepchange offer IVAs is because they can charge much lower fees.

On the other end of the scale, if the payments are very low, the IVA provider creams off £8k and pays £2k, say, to the creditors.

sourcrates

Tractorfan22 said:

I’m interested in this I can pay mine off but they are asking for 8k in fees! Is this right? 

The OP never returned or responded to the thread, but yes, that is how an IVA works, if you cant afford to pay your debts an IVA might clear them for you, but come into any money and you are liable for the full cost of the debts plus all the associated fee`s detailed above in other posts.

By far the vast majority of those who sign up to an IVA have no clue how they actually work, one reason why (A) so many are mis-sold, and (B) why so may complaints arise from there use.