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.

IVA FAQs

Are IVA’s a government backed scheme?

IVA’s were introduced in 1986 and form part of the Insolvency Act (1986) to help people who are struggling to pay their debts. Unlike debt management, they are a legislated and formal debt solution meaning that the IVA agreement is legally binding, which can help to eliminate harassment from creditors.

Will I lose my home in an IVA?

Unlike bankruptcy, you wouldn’t usually lose your home in an IVA. If you own your home and have equity you may be required to release it so the IVA company can pay your creditors (that is, the people and organisations to whom you owe money). Read more here.

Will an IVA affect my credit rating?

Your credit rating will be affected whilst on an IVA and will stay on your credit file for up to 6 years. Any debt solution will affect your credit rating, but at the same time if you’ve missed payments and defaulted then your credit file will be affected anyway, as a default also stays on your file for up to 6 years. Read more here.

Do I need to know who I owe before I apply for an IVA?

It’s not a problem if you cannot remember all the people you owe money to before you apply for an IVA. A lot of people forget as they may have been taken out a long time ago. We have systems which can find all your debtors.

How much debt can I write off with an IVA?

The amount of debt that can be written off with an IVA very much depends on personal circumstances, such as your current employment status, debt level and disposable income. The maximum is 90% of unsecured debt but the average is around 60%.

How can I apply for an IVA?

There are 4 ways to apply for an IVA. 1: Call us on 0800 193 1024. 2: Apply online here. 3: Chat with us on live chat. 4: Apply through our Facebook page. The IVA application process is very simple and can be setup in as little as 24 hours. The speed usually depends on how quickly you can get information to us.

I’m thinking about an IVA. But what happens if I have no money spare at the end of the month?

It’s still worth exploring options with a debt management professional. They may be able to help you make your budget stretch further. If not, they will be able to give you advice about which is the right debt solution tool for you. That could be an IVA (in England, Wales or NI) or a protected trust deed (in Scotland) but there are several other potential options.

What happens if my circumstances change?

Talk to your IVA insolvency practitioner. They may be able to get agreement from creditors to a temporary reduction in payments or a longer repayment period to help you over a difficult period.

Why is my bank taking money from my account to pay my debts?

Banks hold an automatic ‘right to offset’. This means that if you have money in a bank account and unpaid loans or credit cards with the same lender, they can take the money in the account to pay off the debts. More confusingly, this can also happen when the debt is owed to a company also owned by your bank.

So, for example, if your bank account is with HSBC and you have an unpaid credit card with M&S Bank or First Direct, a right to offset could be used to pay those debts, because HSBC owns all of them.

You can find more about which banks are subsidiaries of other banks here.

In an IVA, and to avoid the right to offset, you may be required to switch bank accounts.

Will an IVA affect my credit rating?

Yes. The record of the IVA will remain on your credit file for six years from the date the IVA begins.
Will I still be able to get credit with an IVA?

Getting credit is harder with an IVA. If you want more than £500 of credit you’ll need permission from your insolvency practitioner in most circumstances. The chances of credit being approved are less, and any credit you are able to secure is likely to cost more.

Bear in mind, however, that an IVA (and a Scottish trust deed) is designed to help you escape debt, not find new sources of it.

If I choose an IVA, do I have to deal with my creditors directly?

No. In fact, you can’t set up an IVA without an insolvency practitioner who will handle all the to-ing and fro-ing between creditors. Assuming you qualify in other ways (see above) that makes an IVA ideal if you’d rather not speak to your creditors.

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

IVA Guides

Trust Deed Example

Example Unsecured Debts

1Personal loan£8,000
2Credit card 1£6,812
3Council Tax£4,092
4HMRC Debts£5,399
4Overpayments£5,200
4Overdraft£700
Total Owed£30,204

Your Monthly Repayments Would Be

Before
a Scottish Trust Deed £748
(total contractual repayments)
After
a Scottish Trust Deed £295
(total contractual repayments)
Reduced by
60%
Apply Now

* Subject to creditor acceptance
* Payment subject to individual circumstances
* Credit rating may be affected
* Fees apply, subject to individual's circumstances. For more information on our fees click here

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