It may be possible to take a payment break during your IVA. This can prevent the failure of the Arrangement if you are facing a financial emergency.
Included in this article:
- What is an IVA Payment Break?
- How are the missed payments made up?
- What if you miss a payment which is not agreed?
- Options if your IVA payments are too high
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What is an IVA Payment Break?
You may face unexpected financial difficulties during your IVA. Perhaps you have a temporary loss of income. Alternatively an unplanned expense such as an expensive car repair or emergency home maintenance.
While you manage this situation you are unlikely to be able to maintain your monthly payments. In these circumstances your may be able to take a payment break.
This means your Insolvency Practitioner (IP) agrees to suspend your payments until the emergency has been dealt with. The IVA Protocol (revised June 2016) allows your IP to grant up to 9 months of such breaks during the Arrangement.
You can only take a payment break during your IVA with the prior agreement of your IP. They should allow such a request if it is reasonable.
How are the Missed Payments made up?
If you take a payment break the payments you miss have to be made up. However given you are already paying as much as you can it will be impossible to do this by increasing your contributions.
The solution is that they are added at the end of your Arrangement. Once you have made your last contracted payment you will then have to pay the ones you missed.
It is important to understand that taking a payment break during your IVA will extend the length of the agreement.
What happens if you miss a payment which is not agreed?
You should avoid missing IVA payments without prior agreement from your IP. If you do the Arrangement will fall into arrears and there is a risk that it will fail.
After missing payments without agreement it is important that you speak to your IVA Company as soon as possible. They are not likely to be happy. However they will normally want to try and find a solution.
Allowing your IVA to fail is not in the interest of your IP. They should allow you to add the payments to the end of the Arrangement. However you must commit to paying on time from now on.
If you are told to increase your ongoing monthly contributions to make up for any you miss you should try to argue against this. Say that unless they can be added to the end you may have to fail the Arrangement.
Options if your IVA Payments are too high
It may be the case that you simply cannot afford to maintain your agreed IVA payments. If this is the case a payment break is unlikely to help.
If your circumstances have changed or they are simply to much for you then the whole Arrangement should be reviewed.
As long as you can still afford a reasonable amount it might be possible to reduce what you are paying. However this will usually require the creditors agreement and they will expect you to extend the Arrangement for 12 months.
If your monthly payments cannot be reduced you will need to consider allowing your IVA to fail. You would then need to use a different solution to manage your debts.
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