What happens if you miss an IVA payment?
One of the most important things to do if you don't make your IVA payment on the day set out in your agreement is to contact your insolvency practitioner. Let them know your reason for missing the payment and ask whether it's possible to make it at a later date.
Can you miss a single IVA payment?
Your insolvency practitioner (IP) isn't obliged to allow a late payment, but there's a chance they will if you give them a valid reason, such as an issue with your bank or a pay cheque arriving late from your employer. Get in touch quickly with a clear explanation and they may let you pay later.
Whether you can make up a missed payment depends on your IVA's terms and your IP's assessment. A single missed payment won't automatically fail your IVA, especially if you get in touch with your IP quickly and explain what's happened.
IVA breach notice
If you miss payments or fail to meet the terms of your IVA, your insolvency practitioner may issue a formal notice of breach. This gives you an opportunity to explain the situation and take steps to put things right. The timescale for responding will depend on the terms of your IVA. It is important to respond promptly, as failing to address a breach could put your IVA at risk of failure, including the cancellation of your IVA.
What to do if you're struggling with your IVA payments
It's important to let your insolvency practitioner know as soon as possible if you're struggling to make your IVA repayments. If you don't, you risk your IVA falling through altogether. Tell them straight away, though, and they may be able to reach a new agreement with your creditors that lowers your monthly repayments, at least temporarily.
If you're struggling, these steps can help:
Contact your IP immediately. Your IP can review your circumstances and explain what options may be available under the terms of your IVA.
Explain what has changed. Whether it's a job loss, a change in income, or an unexpected expense, give your IP a clear picture of your current financial situation.
Ask about a payment variation. Your IP can apply to creditors for a formal variation to your IVA, which might lower your monthly payments or extend the repayment period. Any changes to IVA payments require creditor approval.
Request a payment break. Some IVAs include a provision for a short payment holiday in genuine hardship cases.
Seek independent debt advice. Free, impartial advice is available from organisations such as StepChange.
What happens if you fail on your IVA?
If you find yourself unable to make any repayments at all, and your creditors can't be persuaded to lower them further, it's likely your IVA will be terminated. Once your IVA fails, the legal protection it provides comes to an end. This means:
You'll still owe any outstanding money to your creditors, and they're free to pursue you individually through the courts.
If your IVA fails, creditors may regain the ability to pursue outstanding debts that were included in the IVA. The amount owed will depend on what payments have already been made and the terms of your agreement.
Your creditors may apply for a County Court Judgment (CCJ) against you.
In some cases, your creditors or your IP can petition for your bankruptcy.
Your insolvency practitioner's fees are normally taken from the payments made into your IVA. If your IVA fails, fees and costs may still be deducted according to the terms of your agreement before any remaining funds are distributed to creditors.
It's a serious outcome, but it isn't the end of the road. There are debt solutions available, and taking advice quickly gives you the best chance of finding a way forward.
Can you get another IVA if one fails?
It's possible to apply for a second IVA after a failed one, but it can be harder to get approved. Creditors will look at why the first arrangement failed and whether your financial situation has changed enough to make a new agreement viable.
Your IP will need to put a compelling case to creditors, showing that you can now meet the repayments. If a second IVA isn't feasible, a debt management plan or bankruptcy may be more appropriate alternatives.
How long does a failed IVA stay on your credit file?
An IVA, whether completed or failed, is recorded on your credit file for six years from the start date of the IVA. It doesn't matter whether the IVA ran its full course or was terminated early; the six-year clock starts from the same point. Learn more about how an IVA affects your credit score.
Bankruptcy after a failed IVA
Once your IVA has collapsed, your creditors are legally entitled to contact the courts directly. Creditors generally must follow bankruptcy procedures and you will receive formal notification.
This can sound catastrophic, and it's certainly not an ideal position to be in. But if you have a low income and few assets, bankruptcy may actually be the best option available to you. That said, there are risks attached to declaring bankruptcy and alternatives may be available, so before choosing this route, try communicating directly with each of your creditors and see if you can renegotiate a new arrangement with them individually.
Alternative debt solutions
It's also worth bearing in mind that you may not have been well suited to an IVA in the first place. If that's the case, it's worth looking into alternative debt solutions, such as a debt management plan, debt relief order, or bankruptcy, to see whether one of these is a better fit for your circumstances. Our debt management guides can help you weigh up your options.
How to avoid missing IVA payments
Staying on top of your IVA payments takes planning, but there are practical steps you can take to reduce the risk of falling behind.
Set up a direct debit: Automating your IVA payment removes the risk of forgetting or delaying it.
Keep a monthly budget: Track your income and essential outgoings so you can spot a shortfall before it becomes a problem.
Report changes in your income promptly: Most IVAs require you to notify your IP of any significant change in earnings. Doing so proactively can trigger a review and adjustment before you fall into arrears.
Do not take on additional credit: Taking on additional credit during an IVA may breach the terms of your agreement, so you should speak to your IP before applying for credit.
Stay in regular contact with your IP: Do not wait until there is a crisis. A quick update call can flag issues early and keep things on track.