When you agree to the terms of an Individual Voluntary Arrangement (IVA), you agree to pay your creditors regular amounts at regular periods.
But can you take a payment break from your IVA payments if your circumstances change?
Can you take a payment break if you lose your job? or can you take a payment break if your partner leaves and you are no longer able to maintain payments? And what happens if something else happens to stop you paying each month?
The term of an IVA is normally 5 years, which is rather a long time to be under the hope that your circumstances won’t change for the worse, especially when changes may be beyond your control.
Creditors and Insolvency Practitioners recognise this too so, in most circumstances, they do have the ability to take actions to help the IVA by allowing a short break to the payments, when there is a real need to do so.
Historically, a standard condition found in most IVA proposals only allowed for 2 missed payments within the term of the IVA. This was designed to take care of those occasions where someone in an IVA plainly refuses to continue paying into their IVA. After missing 2 payments the I.P. could declare the IVA as being in default and notify creditors that the arrangement had failed, freeing creditors to pursue the debtor once again.
Creditors actions could then include petitioning for the debtor’s bankruptcy if they so wished. Whilst this is not always the action creditors would take, it is generally considered the threat of bankruptcy action being taken ought to be enough to deter flagrant payment violations.
It is in the interest of all parties to ensure the IVA has the best chance of success, and with the introduction of the ‘IVA Protocol’ on 1st February 2008, the payment break clause was redefined.
The clause now allows a payment break of up to 6 consecutive payments to be taken once during the IVA, to be implemented at the sole discretion of the I.P.
This enables further financial support than before for those suffering exceptional, but temporary, changes in circumstances when in an IVA, whilst maintaining the authority of IP’s by allowing them to determine if and when a break is acceptable, without the need to convene a variation meeting.
Some examples of temporary changes in circumstances would typically be redundancy or illness, but could also cover situations surrounding a domestic emergency which requires immediate financial expenditure, such as a boiler failing or car breakdown.
Assuming the payment problem is temporary, there would be two options available to get the IVA back on track, once things return to normal.
- An option to extend the length of the IVA by the number of missed payments.
- An option to arrange for the arrears to be paid off through overpayments into the IVA.
In both options it is imperative that all parties agree to the course of redress to be taken and, once agreed, that the new arrangement is adhered to.
In all circumstances, it is by far the better course of action to contact your Insolvency Practitioner as soon as you realise there will be a problem making your IVA payments. By keeping the insolvency Practitioner informed you increase the chances of reaching a successful outcome and of keeping your IVA on track.
If you are having difficulties paying your IVA and you would like to discuss your options call 0800 088 7503, or download one of our free IVA guides which are designed to help you find a solution.
Here’s the link to the IVA guides, or you can find them on navigation bar and the left hand side of each page of the site.
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