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How can my IVA fail?

Individual voluntary arrangements (IVAs) have come a long way over the years, and should you be faced with a difficulty in life there’s usually something that can be done to put it right.

There are things however that would put your IVA in jeopardy, and many people worry about what they would do in this situation. It’s important to remember that many IVAs do complete as expected. It’s still important however to know where you stand.

Here we’ll talk about how an IVA can fail, how you can try and prevent it happening, and what would happen next if you were unable to put things back on track.

Things that constitute as a breach of your IVA

Your IVA is a legally binding agreement, which means your creditors have to abide by the rules. It also means however that you need to stick to what you’ve agreed to do as part of your IVA proposal. If you don’t, this can lead your IVA to fail.

Your IVA won’t fail instantly if you do break the terms of your proposal. You’ll be issued with a breach notice, which lets you know how you’ve broken the terms and what you can do to put it right. A breach notice can be issued for not doing what was agreed in your IVA proposal. This includes:

  • Missing payments or falling into the equivalent of three months' arrears with your contributions
  • Not doing something the Supervisor of your IVA reasonably asks you to do - for example, not selling an asset you agreed to sell
  • Not paying in a percentage of additional income that you've earned
  • Failing to pay the sale proceeds of assets into your IVA
  • Borrowing more than £500 without the Supervisor's permission. This includes borrowing money from family or friends
  • Not providing information needed for your annual review
  • Not declaring windfalls to the Supervisor (such as inheritances, compensation payouts, or lottery wins)

What happens if I breach my IVA?

Your breach notice should tell you what the problem is and give you a timescale to remedy things. If you don’t remedy the breach, the Supervisor will have to arrange a meeting of creditors. During this meeting, your creditors will be given the option to terminate your IVA.

There are usually things you can do to get your IVA back on track, for example by providing the information needed for your annual review, or by paying in additional income. If your circumstances changed and you weren’t able to do this, your IVA Supervisor could look at asking the creditors to vary the terms of your IVA. This means asking them to accept a change to what they originally agreed when your IVA was approved.

Breaking the terms of your IVA doesn’t just mean your circumstances are changing for the worse. For instance, if your income increases and you don’t declare it, you could find yourself in breach of your IVA. Any changes, good or bad, must be disclosed to the Supervisor of your IVA.

If you’re not sure whether something could go against the terms of your proposal, it’s important you get in touch with your IVA Supervisor for advice.

How can I keep my IVA on track?

If you’ve had changes to your circumstances there are things your Supervisor can do to try and keep things on track. For instance, if you have a short term emergency cost, you could be able to take an authorised payment break to help you cover it.

If you’ve had a more long term change, it might mean that your Supervisor needs to contact your creditors to arrange a variation of your IVA.

Your IVA Supervisor will act fairly in dealing with any changes to your circumstances, and will be able to decide on any action that needs to be taken. The sooner you make them aware of any issues, the sooner they’ll do what they can to help.

What if I can’t resolve an IVA breach?

If all other options had been explored and your IVA did fail, your Supervisor would send you a certificate of termination to confirm that your IVA has come to an end.

Should your IVA be terminated, you’ll no longer be protected from your creditors taking action against you. The payments you’d made into your IVA would be taken into account, but you’d still be liable for the remaining outstanding amount. They can start or resume interest charges on your debts. There's also a chance that your creditors could petition to make you bankrupt.

Should your IVA fail, you can still speak to StepChange Debt Charity to discuss the other options open to you. We’ll work with you to try and make a success of your IVA, but if your circumstances have changed to the extent there’s no realistic chance your IVA can be successfully completed, termination may be the only option.

Can I terminate my IVA voluntarily?

Yes. You can ask that the Supervisor terminates your IVA by putting your request in writing.

Last updated February 2016

 

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Foundation for Credit Counselling Wade House, Merrion Centre, Leeds, LS2 8NG trading as StepChange Debt Charity and StepChange Debt Charity Scotland. A registered charity no.1016630 and SC046263. It is a limited company registered in England and Wales (company no:2757055). Authorised and regulated by the Financial Conduct Authority.

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© StepChange Debt Charity 2016