How long does an IVA take?
In most cases, an IVA (Individual Voluntary Arrangement) will last for five years, but it isn`t always so straightforward. After all, the terms of the IVA will be based on a few assumptions - in particular, that the individual`s income and expenditure levels won`t change significantly before the end of the IVA, and that they`ll be able (if they`re a homeowner) to free up a certain amount of equity towards the end of the term.
However, nothing in this life is certain. Things can change:
- The individual could, for instance, lose their job, lowering their income.
- They might find themselves responsible for looking after an elderly relative, increasing their expenditure.
- The value of their home could drop, meaning they can no longer release equity from it.
What happens then?
If their circumstances do change, it`s in no-one`s interests to let the IVA fail. After all, the IVA wouldn`t be in progress unless the borrower and the majority of the creditors had agreed to it.
As a result, the lenders should consider any reasonable way of making up for a shortfall in the contributions to the IVA.
If the individual finds they can`t release equity from their property, for example, the lenders may allow them to make a number of extra payments at the end of the five-year period instead (effectively extending the IVA by up to a year). If they miss a payment or two, they may be able to make them at the end of the five-year period - as long as they have a very good reason for missing those payments.
Throughout the IVA, the individual`s Insolvency Practice will support them, which includes drawing up an `IVA variation` if necessary - a new proposal that lays down new repayments terms for the remainder of the IVA. Like the original IVA proposal, this will be put to the lenders: if enough of them approve it, it can go ahead.