I am going to pay more back than I owe on my IVA - Is this right?

Get expert opinion. This is the place for new questions to be posted.
7 posts Page 1 of 1
Disappointed01*
Posts: 2
by Disappointed01* » Thu Apr 19, 2018 7:31 am
I am very upset with the way my IVA has progressed. I started with a debt of £25k and my IVA is due to finish in 4 months. If I release equity or pay another 12 contributions, I will have paid £20k over my original debt. I have been consistently told I would never be required to pay more than what was owed so how is this possible. I feel this is criminal. During the IVA my circumstances changed and I had two big promotions/salary increases and I am currently paying almost £1000 in to my IVA which is why I will have ended up paying so much over the original debt but I feel this is criminal and there should be a law against it. Is there anything I can do about this?
User avatar
Foggy
Forum Expert
Posts: 26883
Contact
by Foggy » Thu Apr 19, 2018 7:59 am
During an IVA you owe the full original debt, plus fees and possiblre statutory interest .... most people never get the benefit of massive promotions and so usually pay far less than the original debt --- don't forget that you are also being forgiven contractual interest, often at a rate far higher than statutory interest.

If, due to extra income, windfalls, PPI claims etc, you hit the figure before the term the IVA should end early.

On a debt of £25k I would expect that figure to be around the £40k. I would ask your IP for an account as you must be getting close and a 12 month extension might not be warranted.
User avatar
Lisa Thomas
Industry Expert
Posts: 6869
Contact
by Lisa Thomas » Thu Apr 19, 2018 8:14 am
As Foggy says you always owe the debt, interest and costs throughout an IVA and any balance unpaid at the end of a successful IVA is written off.

The IVA would have meant that you got to keep your property which would likely have been lost had you been made Bankrupt.
Disappointed01*
Posts: 2
by Disappointed01* » Thu Apr 19, 2018 9:43 am
Thank you for your replies.Please could explain what statutory and contractual interest is and what it actually means in direct relation to my IVA? I haven’t come across these terms before and I am unsure what it actually means for me. Thank you

Disappointed01* wrote:
I am very upset with the way my IVA has progressed. I started with a debt of £25k and my IVA is due to finish in 4 months. If I release equity or pay another 12 contributions, I will have paid £20k over my original debt. I have been consistently told I would never be required to pay more than what was owed so how is this possible. I feel this is criminal. During the IVA my circumstances changed and I had two big promotions/salary increases and I am currently paying almost £1000 in to my IVA which is why I will have ended up paying so much over the original debt but I feel this is criminal and there should be a law against it. Is there anything I can do about this?
User avatar
kallis3
Forum Expert
Posts: 73476
Contact
by kallis3 » Thu Apr 19, 2018 9:50 am
Contractual interest is that charged by your creditors which has obviously been waived. Statutory interest belongs solely to your IVA and I believe is 8%.
User avatar
Foggy
Forum Expert
Posts: 26883
Contact
by Foggy » Thu Apr 19, 2018 10:04 am
Disappointed01* wrote:
Thank you for your replies.Please could explain what statutory and contractual interest is and what it actually means in direct relation to my IVA? I haven’t come across these terms before and I am unsure what it actually means for me. Thank you

Disappointed01* wrote:
I am very upset with the way my IVA has progressed. I started with a debt of £25k and my IVA is due to finish in 4 months. If I release equity or pay another 12 contributions, I will have paid £20k over my original debt. I have been consistently told I would never be required to pay more than what was owed so how is this possible. I feel this is criminal. During the IVA my circumstances changed and I had two big promotions/salary increases and I am currently paying almost £1000 in to my IVA which is why I will have ended up paying so much over the original debt but I feel this is criminal and there should be a law against it. Is there anything I can do about this?


As Kallis says -- contractual interest is what you agreed on your loans. This has been frozen and does not come into the equation save for the fact that you have not had to pay that out. This is typically between 5% and uo to 49% per annum and is "compound" ( which means you also pay interest on the interest ! ). Statutory interest only kicks in if you pay 100% of the full original debt and is sometimes excluded anyway. This is calculated at 8% per ammum on the reducing balance and is "simple" (which means you do not pay interest on the interest, only on the principal debt). Over the course of an IVA, if you had to pay contractual interest it could easily double the debt --- and you have been saved from that particular burden.
User avatar
Lisa Thomas
Industry Expert
Posts: 6869
Contact
by Lisa Thomas » Fri Apr 20, 2018 8:51 am
Statutory interest is possibly a standard term in your IVA proposals although in most of mine we propose for interest to be waived.

It's calculated at 8% per annum from the start of the IVA to the date of any dividends paid.

If it applies to you then you could propose a variation asking creditors to waive it.
7 posts Page 1 of 1
Return to “Ask IVA Forum and Industry experts”

Who is online

Users browsing this forum: No registered users and 23 guests