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 that is set out by your agreement, is to take positive action to contact your insolvency practitioner. It is important to do this as soon as possible so that you can let them know your reasons for failing to make the payment on time. Once you contact them you should enquire about whether or not it is possible to make the payment at a later date.
Can you miss a single IVA payment?
Your insolvency practitioner (IP) is not compelled to allow you to make a late payment but there is a chance that they will if you supply them with a valid reason. Some examples of valid reasons may include having issues with your bank or receiving your pay cheque late from your employer. If you do this swiftly with a good explanation, they may let you make your payment later.
IVA breach notice
It is fairly likely that your IP will send you a formal notice of breach at some point after you fail to make a repayment. This form of documentation will ask that you supply a formal reason as to why you failed to meet the payment terms that you agreed upon. Typically an Individual Voluntary Agreement will allow you a maximum of three months to respond to the notice of breach. If you fail to make your response within this time, you could face some severe consequences such as the cancellation of your IVA.
What happens if your IVA fails?
If your IVA is terminated, the legal protection it provides comes to an end. This means:
Your creditors can contact you directly again and take steps to recover the money you owe.
Any debt that was written off as part of your IVA may be reinstated.
Creditors may apply for a County Court Judgement (CCJ) against you.
In some cases, your creditors or your IP can petition for your bankruptcy.
It is a serious outcome, but it is not 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 is possible to apply for a second IVA after a failed one, but it can be more difficult 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, demonstrating that you can now meet the repayments. If a second IVA is not 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 date it was registered on the Individual Insolvency Register. It does not matter whether the IVA ran its full course or was terminated early, the six-year clock starts from the same point.
What should you do If you can't pay your IVA?
If you are struggling to keep up with payments, the steps below can help:
Contact your IP immediately. The sooner you do this, the more options you are likely to have. Your IP works on your behalf and their job is to help find a workable solution.
Explain what has changed. Whether it is 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.
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.
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 new debt. Taking on additional credit during an IVA can breach your agreement and jeopardise the arrangement.
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.