An Individual Voluntary Arrangement (IVA) is a debt solution which involves yourself and your creditors coming to a legally binding agreement to extend your loan term and allow you to make reduced monthly repayments over this new timeframe.
Whilst an IVA can provide you with a flexible option to address your debt and alleviate the financial strain of debt in the short term, they nevertheless come with a number of dangers which could cause a long-term substantiation of your problems.
The following page will explain which measures you should take if you experience an unexpected circumstantial change, such as getting injured or being sacked, and subsequently begin to find it difficult to make your monthly IVA payments.
I can’t afford to make my payments anymore; what should I do?
If your financial situation worsens whilst you are on an IVA are you are rendered unable to make your monthly payments into it, then you should notify you insolvency practitioner immediately. A failure to do this will put yourself at risk of aggressive legal action from your creditors, because your IVA will be terminated if you consistently fail to make your payments.
If your finances have changed because you have been sacked, or you have been unable to work due to an injury, then you should let your insolvency practitioner know right away as they might be able to negotiate smaller monthly payments with your creditors.
Temporary financial problems
If your financial situation has worsened due to a unexpected occurrences, and your IVA was devised in accordance with the IVA protocol, then your insolvency practitioner should be able to grant you a payment holiday up to half a year without acquiring the consent of your creditors. Using this entitlement might be advisable if you believe that your recent financial deterioration is temporary and will improve in the upcoming months. For example, if you have been ill recently and thus have been unable to work, then you might choose to take up this payment holiday and get the vital breathing room necessary to recover financially.
All IVA’s that have been arranged after the 1st July 2012 and have been devised in accordance with the IVA protocol, will permit your insolvency practitioner to grant you as long as a three month holiday break providing that you can provide them with sufficient evidence to show that you are suffering from genuine short term financial difficulties.
Thus, you would need to show confirmation of your employment or a proof of your illness if these were the driving factors behind your financial deterioration, and will have to hand in all the relevant documents to your insolvency practitioner for them to evaluate.
Remember, if you manage to secure a holiday break, you will have to make the missed payments later on down the line.
Long-term financial problems
If your financial condition deteriorates further whilst you are using an IVA, and you do not envisage it improving anytime soon, then your insolvency practitioner might be able to negotiate a further reduction in your monthly payments. You will have to acquire a majority approval from your creditors in order to secure this however and your insolvency practitioner might ask you for additional payment in order to facilitate this modification.
If you fail to attain the majority approval necessary to reduce your monthly IVA payments further, then your agreement will collapse and your creditors will be able to start pursuing legal action against you again. If this occurs, then you should contact each of them individually and try to come to a new agreement about the repayment of your debt, otherwise you might find more than one opening bankruptcy proceedings against you.