If you are already in an Individual Voluntary Arrangement (IVA) but are now struggling to keep up with your agreed payments you are not alone.

The Arrangement is likely to last 5-6 years and during that time it is perfectly normal for your circumstances to change or the world around you to change. It is also possible that you agreed to a monthly payment amount that is just to high.

When this happens and you find yourself unable to meet your payments you have a number of options open to you depending on how significantly your situation has changed.

If you are struggling with your IVA speak to your IP first

As soon as you realised you are having difficulty paying your IVA the first thing you should do is speak to your IP (Insolvency Practitioner) or case worker and explain the problems you are facing.

Depending on how your circumstances have changed there are various options that can be considered to enable you to get back on track.

If the problem you are experiencing is temporary then a payment holiday to cover the gap could be the solution. If the problem you have is more permanent  then it may be possible to reduce your monthly payments for the remaining term of the Arrangement.

BMD Tip: Your IP is unlikely to allow you to reduce your payments simply because of a general increase in the cost of living. If they will not help for whatever reason you will either have to tighten your belt and continue making the payments or consider the option of letting the Arrangement fail.

Can you settle your IVA early?

If the change in your circumstances is so significant that you can no longer keep up any payments at all then there is a risk that your IVA might have to fail. However the options at this point will depend on a number of different factors.

If you are currently near to the end of the Arrangement with only a few more payments to go your IP can ask your creditors to accept the payments you have made already as full settlement. If this is accepted then it will be treated as completed as if all the payments had been made as normal.

Unfortunately this will not work unless you have very nearly made all of your payments. If you are in the middle of the Arrangement the only option to settle it early would be if you can make a lump sum payment available to your creditors.

BMD Tip: This option might be possible if you have been made redundant and received a redundancy payment if if you can get a lump sum from any other source.

Should you let your IVA fail?

If you simply cannot maintain your monthly payments or get together a lump sum and your IP is unable to help then the next option is to consider letting your IVA fail. But what will this mean?

If your Arrangement fails then you will be back to square one with your debts because you will normally still owe all or most of the debt you had when you started. As such you will have wasted time and money. However other than that there will probably be few implications.

Even if you are a home owner with equity in your property it is unlikely that the creditors in your IVA will want to force you to go Bankrupt. However you must remember that you will still need a plan to deal with your outstanding debt as eventually your creditors will start their collection actions against you again.

What should I do if my IVA has failed

If your IVA has failed there are a number of options open to you. The first thing you can consider is actually starting a new IVA with a different IP based on your new circumstances. This is possible but it would mean starting from the beginning again and facing another 5 or 6 years of payments.

If starting a new arrangement is not possible or does not appeal to you then the option chosen by many people is to go Bankrupt. If you can no longer afford to pay anything towards your debt this is an ideal solution as you will not have to make any more monthly payments. After 12 months you would be discharged and debt free.

BMD Tip: You should not decide to go Bankrupt without taking additional advice from one of out experts especially if you are a home owner.

The alternative option you could also consider is a Debt Management Plan (DMP). However this would only work if you are able to pay a sensible amount towards your creditors each month and it will often take many years to pay everything you owe back. If you were able to do this then possibly starting a new IVA would be a better option.