How can an IVA fail
An Individual Voluntary Arrangement or an IVA, is a legal method of resolving debt problems. It allows a person to repay a percentage of their unsecured debt back to their creditors in affordable monthly instalments over a fixed term, usually around 5/6 years. Both debtors and creditors are legally bound by this arrangement and must comply with what is set out in the proposal; if you do not do this, you run the risk of your IVA failing.
There are various things which you could do that may put your IVA at risk, however circumstances can change and your IVA will not fail instantly, you will first be given a notice of breach which highlights how you have not complied with the terms of your proposal and what you can do to rectify this.
What is a breach?
Breach by definition is the act of breaking an agreement. Things which are considered as a breach include;
- Missing payments or falling into three months arrears with your contributions
- Failing to provide information required to complete your Income and Expenditure Review
- Failing to pay in additional income that has been identified
- Taking out finance greater than £500 without permission from your Supervisor
- Failing to declare windfall to your Supervisor
- Failing to do something that your Supervisor requests you to do – for example, failing to sell an asset which was agreed in your proposal
- Failing to pay in any money you have received from selling any assets
What happens if I breach my IVA?
A notice of breach will explain the alleged breach and explain how you can rectify this in a given time-frame. Should you fail to remedy the breach, the Supervisor will be required to arrange a meeting of creditors in which they will be given the option to terminate your IVA.
It is important to remember that if your circumstances change in any way, good or bad, for example if you have a decrease in your income or even if you have an increase in income it is important to inform your Supervisor of these changes either way. Notification of these changes will allow your case to be reviewed and ensure that your IVA is affordable, preventing you from breaching the terms and conditions. Any changes must be disclosed to the Supervisor of your IVA.
How can I Keep my IVA on Track?
There are things that can be done to help keep you on track with your IVA and avoid any problems.
1) Budget carefully
Your budget was put together in order to help you keep your living expenses covered over the term of your IVA; use this to manage your money between reviews. If you need help budgeting, why not take a look at our Best Budgeting Apps of 2018 blog.
2) Inform your IVA Supervisor if you are struggling with payments
Your IVA provider will be there to support you throughout your IVA journey and it is important to notify them if you are struggling with payments, there are things that can be done to provide you with some relief in these instances. When your case has been reviewed and depending on whether you are experiencing long term or short-term difficulty your Supervisor will offer you with solutions.
3) Keep track of all your paperwork
This may sound like an obvious one but it is all too easy to lose track of things. File all paperwork away so that it is always there at hand should you require it.
4) Address any issues as soon as they arise
If there is an issue with your IVA, bringing it to the attention of your Supervisor as soon as it has been identified is the best way to help things run smoothly and keep your IVA on track. As well as keeping them informed, should you receive contact from them please be sure to respond and reach out to any missed calls/messages.
5) Don’t be afraid to ask questions
Your Supervisor is there to help resolve any problems you may have and to answer any queries so do not hesitate to reach out.
6) Using your client portal
As an Aperture client, you have access to a 24/7 online portal, which allows you to take full control over your IVA. You can make payments, see how much you have paid to date (including your last payment to us) and also see if you are in arrears. The portal makes things quick and accessible for you.
What happens if my IVA fails?
If all other options have been explored and you cannot prevent breaching your IVA, resulting in the failure of it, you will be issued with a letter of termination to confirm that your IVA has come to an end.
Should your IVA be terminated, you will no longer be protected from the actions of your creditors and you will be liable for the remaining balance of your debts. Creditors can start/resume interest charges on your debts and there is a chance that they may petition to make you bankrupt. The IVA will no longer be under the supervision of an Insolvency Practitioner and you will be responsible for liaising directly with all creditors or their representatives.
Will I still have to pay the IVA fees if my IVA fails?
As part of their termination duties, the Insolvency Practitioner will distribute any remaining IVA funds, giving priority their own fees. This has the effect of reducing the amount being paid back to creditors.
There are other options
- Propose another IVA
- Petition for bankruptcy
- Enter into a Debt Management Plan (you can see how a DMP compares to an IVA in our 'Considering an IVA or DMP?' blog.
- Apply for a Debt Relief Order
Before entering into a new agreement please seek further advice to ensure you are aware of the best option for you and your given situation; the Citizens Advice Bureau will be able to provide you with advice on this.
Within an IVA honesty is the best policy and it is best that you keep in contact with your IVA provider should any issues arise.
If your IVA with Aperture has failed or you fear that it may, you can contact us on 0333 939 7920 to speak with one of our advisers to discuss this further.