An IVA (Individual Voluntary Arrangement) is designed to last long enough for your lenders to get back a reasonable proportion of what they are owed, while giving you a definite date for clearing your debts.
But things don`t always work out the way they were planned. People`s situations can change, and if you find yourself unable to keep up with your IVA payments, you`ll need to take action fast.
If you begin to struggle with your IVA payments, you`re in danger of breaking the agreement, which could carry serious consequences. As such, it`s important that you let your Insolvency Practitioner (IP) know as soon as you can.
What your IP can do will depend on the situation you`re in. Most IVAs will have it written into the terms that you can take a short break from payments if your circumstances require it - but this is only likely to be for up to around three to six months.
So, for example, if you are made redundant during your IVA but you think you`ll be back in employment in the next few months, you should be able to get a break in your payments until you are back in work. The amount of time you`ve taken out will be added onto the end of your IVA, to make sure that you`re still making the same number of payments you agreed with your lenders.
However, if your finances look to have taken a permanent turn for the worse - for example, if something happens to you that prevents you from returning to work - there may be no option but to let your IVA fail. If this happens, you`ll need to find another solution for your debts.
In some cases, the most appropriate route from here will be bankruptcy. Bankruptcy does not often require regular monthly payments, and is usually over within a year, although you will probably be required to give up most of your valuable assets (e.g. your home or car), with the money raised going to your lenders.
If you have very little to offer your lenders in the way of assets or monthly income, on the other hand, you may be eligible for a Debt Relief Order (DRO).
And if you can still afford to make some monthly contribution to your debts and your circumstances are likely to improve in the medium term, you might be able to arrange an informal debt management plan with your lenders.
For more information on IVAs and what to do if you`re in trouble, click here or call 0800 195 2911 to speak to an expert debt adviser.
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