Payment problem in an IVA
There's a possibility you may encounter problems with maintaining your payment during your IVA, so here we look at the options that are available to you should this happen.
The most important thing to remember is don't panic.
Communication Is Key
IVAs are normally based on regular payments being made through monthly contributions to your Insolvency Practitioner.
When you enter into the IVA, you take on a legal obligation to maintain your agreed payments throughout the term of your IVA in line with the repayment schedule, which is laid out in your proposal and agreed with creditors at the Creditors' Meeting.
So, as soon as you realise there's an issue in maintaining your payments you should inform your Insolvency Practitioner.
By informing your Insolvency Practitioner as soon as you recognise you have a problem you ensure your IVA has the best chance of staying 'on track'.
Protocol Compliant IVAs
Before the introduction of the 'IVA Protocol' in 2008 IVAs were quite inflexible, particularly when it came to payment problems but, fortunately, since then the terms and conditions of an IVA have been much more accommodating.
Payment breaks
Under the terms and conditions introduced under the IVA protocol the Insolvency Practitioner now has, at their discretion, the option to suspended your IVA payments without the need for creditor approval.
The length of time you will be allowed to have as a payment break will be determined by the start date of your IVA, as the maximum break term was increased as part of revisions made to the IVA protocol introduced on 1st October 2016.
IVAs entered into before 1st October 2016 have a maximum allowed break of 6 months.
IVAs entered into after the 1st October 2016 have a maximum allowed break of 9 months.
The IVA protocol dictates that when a payment break is taken the term of the IVA will automatically extend by an equal number of months as the payment break lasts.
If the allowable break term isn't long enough, the Insolvency Practitioner can call a variation meeting, to give the creditors an opportunity to consider a longer break. It will then be down to creditors to determine whether they are prepared to accept any longer break to payments.
Payment reductions
The IVA protocol also introduced, at the IP's discretion, the option to reduce payments buy as much as 15% of the agreed payment level, without the need to seek further approval from the creditors.
This option provides relief to payments that are under pressure due to affordability and has proved itself to be incredibly useful.
Summary
These 2 new options provide more support than ever before, ensuring that even in the most difficult of financial circumstances, there's a real chance for the IVA to succeed.
Indeed, this flexibility has already saved many hundreds of IVAs which would have been destined to failure under the older terms and conditions.
For further information regarding IVAs, take the link to our Essential Reading page.
