What If I Can’t Pay My IVA?

What happens if you can’t pay your IVA for a month? What happens if you can’t pay it at all? In this guide, we’ll explore your options.

I think I’m going to miss an IVA payment

Don’t wait until you have missed a payment to get in touch with your insolvency practitioner. If you know or suspect you’ll be struggling to pay this month, get in touch with them as soon as possible.

I’ve got short term problems

Most IVAs will enable you to take a payment break for a few months if you have short term issues. If your IVA was made under the IVA protocol – a voluntary code of practice that ensures IVAs are clear and fair – your break should be relatively straightforward to arrange. If not, you’ll need to check the specific terms.

Assuming your IVA was set up under the protocol, you should be able to ask for a break of between 6 and 9 months (depending on when your IVA was agreed).

You’ll need to prove to your insolvency practitioner that you can’t afford to pay, and any break will be covered either by extending the length of your IVA or amending payments once the break ends.

I’ve got long term problems

Your insolvency practitioner can lower your monthly payments by up to 15% without having to ask the creditors to agree. If your income has reduced a little, this could be enough to ensure your IVA can continue.

If you need a larger reduction, the insolvency practitioner will need to seek approval from the creditors. There may be a fee for this and your creditors don’t have to agree to the request. If they refuse and you have no way of repaying the IVA, it will be terminated and you’ll need to find an alternative debt management route.

For help with this, talk to us.

I missed an IVA repayment

If you’ve already missed an IVA payment and you haven’t yet been in touch with your insolvency practitioner, do it now. Some issues can be resolved immediately without drama. If you were paid late or there was a bank error, you should be able to make the late payment without any further penalty.

If you’ve missed several payments, you may be able to reach an agreement to repay the arrears with your practitioner whilst resuming your regular monthly payments.

Notice of breach

If you don’t contact your practitioner they will issue a notice of breach. Usually this will give you three months to explain what went wrong and put it right. If you repay the arrears, your insolvency practitioner is unlikely to take any further action against you and the IVA will continue as normal.

If you respond to the notice but still can’t pay the practitioner may reduce your monthly payments (see I’ve got long term problems above), terminate your IVA so you can find an alternative debt management route, or terminate your IVA and apply to court to have you declared bankrupt.

If you don’t respond to the notice, the practitioner’s only likely course of action is to apply to have you declared bankrupt.

What happens if can’t pay my IVA at all?

If you can’t pay your IVA at even a reduced monthly payment, the IVA will fail. Your insolvency practitioner will apply to terminate your IVA. You may be given the opportunity to find an alternative debt management route. If there is no other viable option, the practitioner will apply to court to have you declared bankrupt.

How many IVAs are terminated?

Government figures show that 15% of IVAs registered in 2017 were terminated although, as IVAs from 2017 are still ‘live’, the final termination rate will be higher. Looking at figures for years where all IVAs are complete, the termination rate is approximately 30% on average, but this still means that more than two thirds of people successfully complete their IVA.

How many protected trust deeds fail?

Scotland doesn’t use IVAs. Instead, it uses the similar (although not identical) protected or Scottish trust deed. You can find the differences between trust deeds and IVAs here. According to figures from the Accountant in Bankruptcy, protected trust deeds have a considerably lower failure rate than IVAs.

Of the 7,390 trust deeds managed by the top 10 trustees in Scotland and concluded in 2018/9, 1,530 (or just over 20%) failed.

You can’t apply for a trust deed unless you live in Scotland or have a business here, but if you do, your chances of escaping debt are greater than they are via an IVA in England or Wales.

To find out whether a protected trust deed could be the right route out of debt for you, talk to us now.