If I may ask you, what is an IVA? The best answer for it would be, an IVA or individual voluntary arrangement is extensively used for resolving personal debt problems. It is a repayment plan (fixed term) that is designed especially to help someone who is facing a crucial debt problem. This repayment plan gives one the chance to repay the reduced payments to their creditors and protecting their own assets from serious threats of bankruptcy and legal action. This legal agreement came into being on 29th December in the year 1986 as a part of the Insolvency Act and it brought major changes in the UK as far as personal insolvency was concerned. Normally an IVA lasts for a 5 year fixed period. The term is fixed and once it is agreed upon even a creditor does not have the right to change it.
It has been seen that IVAs have mostly proved to be successful. But they have even failed during certain instances. There are times when people go for an IVA but discover after a certain point of time that they won’t be able to afford their payments. However, as you cannot start an IVA unless it is actually proved that you can make your payments these situations do not usually arise.
In most cases, people find it difficult to make their monthly payments when their income unexpectedly falls. This may result from the loss of their jobs or a new baby or even a prolonged period of illness.
What are the options if an IVA fails?
If an IVA fails there are plenty of options that can come to your rescue. Let us have a look at a few of them:
- A Payment Holiday: The first and effective option is to go for a payment holiday. This gives you a break temporary for a period of 2-3 months from IVA payments. This gives you a chance to search for a new job or even overtime for arranging the money required for your payments. The payments that you have missed are added to your IVA. The payment holiday option works only when the drop in your income is temporary. But the drop is permanent then you will have to think of any other variation to the IVA.
- IVA variation: It refers to reducing the payments that you give for IVA after signing a formal agreement with creditors. You will then have to increase the number of your payments and compensate for your lower payments every month. For varying an IVA you will require the help of an insolvency practitioner who will propose variations to the creditors. The proposal gets accepted if it seems to be reasonable.
Future of debts if IVA fails
If certain circumstances arise that you are not able to make payments to IVA then there are chances of its failure. It may not fail even in such a situation if and only the agreed payments have been made by you. But if you are in your earlier stages of payment then there are chances of failure. It will result in huge debts that may become impossible to repay. In such a situation, the best options are starting debt management or declaring bankruptcy.
You should go for any option depending on your personal circumstances and after taking advice from an insolvency practitioner. However, the bankruptcy option is considered better by most people as the payment that goes into any debt management plan is so less that it would literally take years for resolving the debt. It is always an intelligent decision if you do not consider an IVA unless being very confident of the fact that you can afford to maintain your payments.
Leave a Reply