Stopping payments in an IVA IVA Issue
Summary: Stopping payments in an IVA - This article summarises the reasons people stop making IVA (Individual Voluntary Arrangement) payments and the consequences involved.
Reasons for stopping payments in an IVA
These reasons vary between being unable to maintain repayments to be being unwilling to do so. If there is a change of circumstances then this must be discussed with the IVA supervisor at the earliest opportunity. Reasons will revolve around reduced income or increased expenditure (or both!). Redundancy, illness, relationship ending are amongst the most common reasons. However there are some that stop because they have found it too difficult to live within the budget that was originally agreed.
Missing one payment
Even this is not advisable, but especially where there is unexpected expenditure, and after discussion with the IVA supervisor, it may be necessary to take a payment break from the IVA payment. It should be possible to make up for a missed payment by extending the IVA by a month. Even longer payment breaks maybe a possibility in some circumstances.
Missing regular payments
When this happens the IVA is likely to fail. The Insolvency Practitioner has the power to push for bankruptcy though more often the debtor is simply left with the outstanding debt and has to decide on alternative options. This could be bankruptcy or some kind of repayment plan.
Commitment to an IVA
It is important to consider carefully the IVA implications before starting out on it. There are many advantages of an IVA such as the one affordable payment, frozen interest, fixed point end to the debt. However there are some factors to weigh up - perhaps the most important is being prepared to live on a fairly tight budget for the duration of the IVA. All reasonable expenses are covered and allowed for, but depending on our lifestyle choices, we may feel that the restrictions on our expenditure are too difficult.
Alternatives to an IVA
By not paying the IVA payments due to lifestyle choices we need to be aware of the alternatives. Bankruptcy will probably mean having even less available income to live on, though a payment order is usually for 3 yrs rather than 5 yrs in an IVA. A Debt Management Plan may give a little more flexibility to pay less back in the plan, but of course has implications for the length of time to repay the whole debt.