Sometimes a payment problem may occur during the term of your Individual Voluntary Arrangement (IVA).
What action can you take to minimise the damage this payment problem may cause?
Individual Voluntary Arrangements (IVAs) depend on regular payments to your creditors.
When you enter into an Individual Voluntary Arrangement, you actually ‘guarantee’ your creditors will be paid with regular payments, over a fixed period of time.
The payment timetable for the Individual Voluntary Arrangement is agreed at the Creditors Meeting.
When you realise that there is going to be a problem in maintaining the Individual Voluntary Arrangement payments, the first thing you should do is contact your Insolvency Practitioner.
Missed Individual Voluntary Arrangement payments can happen for a multitude of reasons, and its fair to say that some are due to more avoidable problems than others. However, by contacting and informing your Insolvency Practitioner when the problem arises, i.e. as soon as possible, you offer yourself the best opportunity of keeping your Individual Voluntary Arrangement ‘on track’.
These changes have been brought about by the ‘IVA Protocol’, which was an initiative put in place by the Insolvency Service after months of debating between creditors and insolvency practitioners on how best to streamline the IVA process and reduce insolvency costs to the creditors.
Therefore, there’s a two tiered system in place now, where older IVA cases, agreed before the IVA protocol was introduced on 01st February 2008, still have the older proposal terms and conditions, and cases approved after that date have the IVA protocol Terms and conditions in place.
Payment Breaks for IVAs agreed before 1st February 2008
It is usually written into the older IVA proposals that the Individual Voluntary Arrangement will be failed if a client misses in excess of 2 payments over the duration of the Individual Voluntary Arrangement, but this generally is designed to cover the scenario of a client just refusing to make contributions as a matter of choice, and not people suffering with an honest problem with payments.
If a client’s circumstances change due to an unforeseen problem, for example, loss of employment, then provision can be made, at the discretion of the insolvency practitioner, to allow the client to temporarily suspend payments for a short period, and then resume payments when the circumstances improve.
The client’s Individual Voluntary Arrangement payments would normally be required to be increase for a short time, to catch up on the missed payments that the problem caused, but if this is not possible, extending the term of the IVA may also be a option for the insolvency practitioner to consider.
And so, by keeping the Insolvency Practitioner informed of your on going situation throughout the troublesome period, you massively reduce the risk of your Individual Voluntary Arrangement failing due to your payment problem.
Payment Breaks for IVAs agreed after 1st February 2008.
The IVA protocol has really helped IVA applicants when it comes to payment problems. Previously, as stated above, Insolvency Practitioners were given little scope to assist their clients when their financial circumstances took a turn for the worst, but now they have a couple of options available.
At the Insolvency Practitioner’s sole discretion and subject to the correct confirmation and validation of the need for a payment break, payments into the IVA can now be suspended for up to 6 consecutive payments, without the need for the Insolvency Practitioner to seek further agreement from the creditors.
The IVA protocol stipulates that, in the event of a payment break being taken, the term of the IVA will be automatically extended to an equal number of months as the payment break itself.
In the event that a longer payment break than 6 months is required, the Insolvency Practitioner would call a variation meeting to the IVA, which would give the creditors an opportunity to agree or decline any further suspension of payments.
Alongside this new policy, the IVA protocol introduced the ability for the Insolvency Practitioner, again at their sole discretion, to reduce the IVA payments buy as much as 15% of the agreed payment level, before the need to seek approval from the creditors.
These new ‘IVA Protocol’ terms gives the IVA applicant an unprecedented level of support that, even in the most difficult of financial circumstances, should give a real chance for the IVA to succeed.
This level of flexibility has helped save many thousands of IVAs which would have been destined to failure under the older IVA terms and conditions, which would have failed for no greater reason than a change in the applicant’s circumstances. Added to this the substantial savings the creditors have made of many thousands of pounds in fees, that would have been created by all the unnecessary work being undertaken by the Insolvency Practitioner.
It would seem like common sense has prevailed at long last.
For further information regarding all aspects of Individual Voluntary Arrangements, take the link to read more useful articles on the IVA subject
OR call My IVA Adviser for free on 0800 088 7503 anytime to discuss your payment problem with one of our IVA specialists.
Related Articles: