This article contains information about debt solutions available in England, Wales and Northern Ireland. Debt advice in Scotland involves similar but different solutions. If you are considering or have been recommended an IVA as a debt solution, please make sure you fully understand the risks involved when entering into an IVA.
When you sign up to an IVA you’re signing to say that you’ll stick to the payments outlined in your proposal.
This will usually mean making five or six years of instalments every single month.
But what happens if that becomes a struggle?
When is it possible to miss payments?
If you miss payments on an IVA without your supervisor’s permission you’re breaking the terms you signed up to at the beginning. In some situations it’s possible to miss a payment, though it’s important that you speak to your supervisor first.
Everyone goes through ups and downs with their finances and it can be that things crop up while on an IVA that you could never possibly have planned for.
If you find yourself the victim of a bit of bad luck then you should contact your supervisor, explain the circumstances and take their advice on how best to proceed.
Is Christmas an emergency?
Our IVA team get phone calls every December from people wanting to use that month’s IVA payment to pay for Christmas presents. We’d love to be able to tell our clients that they can do this but we also want them to become debt free, so unfortunately we have to disappoint!
The key to a successful IVA is to plan a budget and stick to it every month. If you’ve done this well then you’ll start putting money aside in January and by December you’ll have enough to enjoy Christmas. If you find that you’re unprepared for the festive season read our blogpost about not panic buying at Christmas.
I’ve been paying for ages, don’t I deserve a break?
Most IVAs are a marathon not a sprint. It can take years of dedication and there may be times when it feels hard to keep going. Like most things that are worth doing, it’s tough at times but it’s important that you see it through.
If you were to take a month off your IVA because you wanted a break then you will have to spend more time paying back your debts. Don’t do it!
What if I lose my job?
Obviously losing your job is a little bit different; if you were to find yourself out of work then you might need to take a break from your IVA. Should you become unemployed contact your supervisor and they’ll be able to talk you through what to do next.
It is possible to take up to a six month break to give yourself chance to get back into work. The months you miss are added onto the end of your IVA so you make the same number of payments but it can be a vital buffer if things aren’t going to plan.
Could I vary my IVA instead?
If you suffer a more long lasting set back to your finances, such as long term illness or reduction in income then you can apply for a variation to your IVA. This is where a further creditors meeting is held, to update your offer based on the new circumstances. This may result in your monthly payment being reduced.
Like the initial creditor meeting, it’s not certain that your creditors would agree to a variation but your supervisor should have a reasonable idea about what your chances are and whether this is a suitable option. Generally speaking this is something to only do in extreme circumstances but it can be a way to salvage your IVA if all else has failed.
In most IVAs approved from mid 2011 you may be able to take a payment break without a variation meeting; this is at the discretion of the supervisor but is subject to four distinct conditions.
- Full details of your inability to pay must be demonstrated to the supervisor’s satisfaction;
- No more than the equivalent of three months payments can be agreed to be missed in this way; and
- The duration of the IVA will be extended by the same number of months for which payments have been suspended to recover the sums due, unless you have otherwise made good the shortfall.
- Any missed payments agreed by your supervisor in this way should not be counted in the arrears of contributions which would be regarded as a breach of the IVA and details of this will be included in the annual report.
What happens if I miss a payment without my supervisor’s permission?
If you miss more than three payments in this way you are putting your IVA at risk. You will be in default of the terms of your IVA and your supervisor will issue you with a notice of breach*.
If you are able to offer additional payments to remedy the breach your supervisor will convene a meeting of creditors to vary the terms of your IVA. If you do not respond to the notice of breach or you are unable to offer additional payments your IVA may be terminated.
What should I do if I’m struggling?
If you find yourself likely to miss payments on your IVA then, like we’ve already said, the first thing to do is to speak to your IVA supervisor before you actually fall behind. They’ll be able to help you take stock and talk through your options.
When times are tough it can be tempting to hope for the best and try to struggle on, which is admirable but can also make things worse if the underlying problem is still there. It’s always better pick up the phone and seek help before it’s too late!
*A notice of breach gives you one month to bring your payments back up to date. For more information on breach see part IV of the standard conditions to your IVA.