What happens if I can't make my IVA payments? IVA FAQ
Summary: What happens if I can't make my IVA payments? - When considering an IVA, many are anxious about failing to maintain the IVA payments. This article explains the implications.
This is an understandable concern as no-one knows what the future hold with regard to emergency expenditure or a loss of income.
Agreeing a repayment level
When an IVA is proposed, an expenditure budget is created that should provide for actual outgoings where known and allowances for other expenditure. All reasonable contingencies will be considered and included. The debtor should only agree to the IVA if they feel they can live within the budgetary framework. If there are anticipated changes of circumstances within the lifetime of the IVA, these should also be factored in.
By definition, no one can predict the unexpected. Serious car problems or house repairs can become a major problem when there is no provision for such expense and there is no credit option to take. Alongside the 1-off expenses, regular outgoings can increase - mortgage or rent payments, insurance costs etc. When the unexpected happens, the debtor in the IVA should discuss the problem with their Insolvency Practitioner (IP). It's in no-one's interests for the IVA to fail, so if possible a solution will be found. This may involve taking a payment break for a month or more from the IVA. In the case of a regular increase in outgoings it may be possible to reduce the IVA payment level.
Unexpected loss of income
Very few jobs are completely safe these days. The loss of income is a serious worry for those who have entered a formal IVA process. If this happens, as above, the loss should be discussed with the IP. It may be that another job materialises fairly quickly and a payment break can put the IVA on hold and the length extended to allow for this.
Failing an IVA
Despite everyone trying to find workable solutions to the above problems, sometimes IVA's fail due to changing circumstances. When this happens, the debtor is left with the debts and an alternative solution needs to be found. Very often bankruptcy is the most obvious way forward. However it may be possible to make token payments to creditors until a further change of circumstances takes place and a new IVA could be proposed.