For many people who are in debt and are struggling and want to avoid bankruptcy, an IVA/Individual Voluntary Arrangement is a good option.
So with an IVA, you are allowed to keep your property, make payments of what you can afford for five (5) years, and if your property has equity, you are expected to release a portion of that equity after the 5 years.
Some people in an IVA may not be in a position to release any equity, so their IVA may be extended a period of time, up to 12 months.
At the end of the IVA, you come out the other side of debt, a fresh start, debt free!
But what if your circumstance change and you can no longer afford to pay your IVA?
Failing An IVA
IVA’s are to be reviewed on an annual basis by the IP or Insolvency Practitioner who administrates the IVA.
This annual review is to look at your now current income and expenses to see if you can pay more into the IVA. This is to minimise your creditor’s loss.
Your responsibility in an IVA is to report to the IP any changes in your finances, expenses and income.
If you are struggling or can no longer pay into the IVA, you need to advise the Insolvency Practitioner of this immediately. They may be able to offer some solutions, such as a payment holiday, reduced payments, or restructure the IVA to make it more affordable.
These options will depend on your individual circumstances,
My IVA Has Failed, Now What?
An IVA is deemed to be failed if three (3) consecutive payments have been missed. This is not a hard and fast rule, I have heard of people missing six (6) payments and not receiving a letter from their IP the IVA is considered failed.
Once an IVA has failed, you have some options:
Bankruptcy: You can go bankrupt on your own, or possibly the IP handling your IVA may make you bankrupt. This is rare, but it is a possibility, especially if you have a property with equity.
DRO/Debt Relief Order: Depending on the amount of debt you have, you may want to look at a DRO in place of going bankrupt. Debt Relief Orders are still a form of insolvency, but for lower levels of debt than in a bankruptcy.
Debt Management Plan: You can fall back into a DMP/Debt Management Plan, and make more affordable payments. This may also be a Token Payment Arrangement for a period of time.
Do Nothing: Yes, doing nothing is an option, but not a good one. The debt is always there, looming in the background, and there is no closure. In addition, there can be more collection efforts, and possible legal action.
IVA’s do fail, there are instances where our lives change, and we can no longer continue to pay what we were paying. However, there are options, there are always options, even if we don’t like them.