Under the terms of certain IVA’s, you may be required to make increased monthly contributions if you obtain an unexpected lump sum of money whilst using the debt solution. Conversely, you may have to take immediate action and ask your Insolvency Practitioner (IP) to reduce your monthly contributions if there is an unexpected downturn in your circumstances, such as being made redundant.
The following guide will outline to you which measures you should take if your financial situation changes whilst on an Individual Voluntary Arrangement (IVA).
You can no longer make payments
If you experience a sudden and unexpected change in your situation and are rendered unable to afford making your monthly IVA payments, then it is important that you alert your IP as soon as possible. Depending on the reasons behind your miss payment, you may be able to reduce your monthly contributions temporarily, though you should consider terminating your IVA if this is not possible.
Your salary rises
If you manage to attain a pay rise whilst on an IVA, and your level of monthly income rises significantly, it is imperative that you alert your IP of your change in circumstances straight away. This advisory measure is applicable whether you have been given a raise, acquired a better paid job, or been given inheritance cash from a deceased relative.
Remember, letting your IVA of this change in circumstance is compulsory and is clearly mapped out in your original IVA agreement. A failure to do this could lead to the termination of your IVA altogether, and your IP will become aware of the additional, hidden income at the end of the year anyway when they conduct their yearly evaluation of your finances.
Depending on your IVA, your level of debt, and the duration remaining of your agreement, you may be required to pay more each month on your IVA payments.
Your IVA might also possess a windfall clause. If you are aware that your IVA contains this feature, then you will have a contractual obligation to make payments toward your IVA if you receive some unexpected money through something such as the lottery or from inheritance cash from a deceased relative.
Remember, by failing to alert your IP of the change in your situation, you might be breaching the country’s code of law, so act fast and let them know about any new income you are receiving as soon it is made available to you.
Bonuses and commissions
All IVA’s agreed upon after July 1st 2012 and formulated in adherence with the IVA protocol will possess a condition which specifies that you will only need to alert your IP of any bonuses or commission you have received in certain cases. Typically, this condition will necessitate that you only have to let your IP know about bonuses and commission in cases where the total value of these equate to over 10% of your normal income. If you fall into this category, then you will have to alert your IP about the added cash within 14 days of acquiring it. You will then only need to pay 50% of this bonus total over the 10% threshold to your IVA.
What other information should you alert your insolvency practitioner of?
Under the terms of all IVA’s, there are certain changes in your personal situation which you are obliged to let your presiding IP know about straight away. A failure to do this will constitute a breach of the terms of your arrangement, and it is imperative that you alert them if any of the following occur:
- You acquire a new job with a higher or lower salary.
- Different liabilities you possess that you have neglected to include in your IVA
- You escalate your financial problems by taking out further loans.
- Your level of disposable income rises significantly.
- You move to a new property.
For any other changes in your situation that you are unclear about whether to let your IP about, play it safe and contact them anyway to see if it is necessary.