Your income may have dropped considerably because of coronavirus. But what can you do if this means you can’t pay your IVA?
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Can’t pay your IVA – Stop paying until your income recovers
Many thousands of people can’t pay their IVA because of the coronavirus. If you find yourself in this position, speak to your IVA company as soon as possible about taking a payment break.
This is basically a temporary suspension of your monthly payments. You usually take a break for 3 months but it can last longer if necessary. Once your income is back to normal the payments start again.
Any missed payments should be added to the end of your IVA. As a result the agreement will be extended. However there should be no increase in the amount you pay when they re-start (unless of course your income has increased).
Given the impact of the coronavirus there should very little reason why your IVA company will not grant a payment break. The break could last for up to 9 months.
Can you make reduced IVA payments?
Where you feel you can still afford to pay something towards your debt, you could talk to your IVA company about reducing your payments temporarily. However in most cases a full payment break will be a better option as this will be easier to manage.
But what if once you are back working you can’t pay your IVA because your income has fallen more permanently? Perhaps your shifts or overtime will be cut going forward or you have even had to take a new job.
In these circumstances it may be possible for your IVA company to permanently reduce your ongoing payments. Where your disposable income has fallen lower payments can be agreed. If the terms of your Arrangement are based on the standard Protocol, your IVA company can reduce your payments by 15% without having to ask your creditors.
Don’t think about trying to reduce your IVA payments until you know what your future income will be. Its best to take a payment break until you can establish this.
Should you change to a different debt solution?
What if you were struggling with your IVA before the coronavirus problems started? If so, even if your income goes back to normal once you are back to work, you will still find it difficult to make your payments.
In this situation you have two options. You can take a payment break until you are back to work and then discuss reducing your payments with your IVA company. Alternatively you can stop your IVA and use a different debt solution.
If you live in rented property or are a home owner with no equity, you should consider the option of going bankrupt. Often this sounds far worse than it actually is. In reality it could really help. For example, if you have little or no disposable income you probably won’t have to make any further payments towards your debt once you are bankrupt.
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I am in an IVA and qualify for the small business grant of £25k. Is this classed as a windfall? I would hope not as surely this is to assist the business and loss of earnings during this difficult time.
Hi Jacqueline
Given what you have said I assume you are running a business. If the business is a limited company then there is no problem. The coronavirus grant should be paid into the company account and used to pay the company bills as normal. It would not be at risk from your IVA.
However if you are a sole trader then it is a bit more complicated because in effect the money has been paid to you personally. In any other circumstances this would be a windfall. However I would hope that given the current situation and most importantly the reason you have received the money, your IVA company would be sensible.
In my view they should not treat it as a windfall and allow you to keep it. After all it should only have been applied for if needed to support your business. That said I would expect you to maintain your IVA contributions from the money received.
Of course I can’t speak for all IVA companies but I would hope this is the way yours would react.