What Happens if You Stop Paying Your IVA? Insight And Solutions

Have you ever promised to do something but struggled to keep your word? Maybe life threw a curveball, and suddenly, sticking to that promise felt tough. Now, imagine making a promise not just to a friend but to the people you owe money to, called creditors. It’s called an Individual Voluntary Arrangement (IVA). 

What happens if you can’t keep this promise? What can you do to get back on track? Let’s explore the maze of missed IVA payments together, finding solutions and finding a path forward. 

The IVA Promise

So what exactly does it mean to fail an IVA? When you agree to an Individual Voluntary Arrangement (IVA), you’re making a serious commitment saying “Yes, I’ll pay back my debts in a way we all agree on.” 

But sometimes, things don’t go as planned. This is when an IVA fails. But is there a way in which you can avoid an IVA failure? Of course there is! It’s all about taking the necessary action before it’s too late. Find out in detail in the next section. 

Avoiding An IVA Failure

If you face any difficulties making payments, the first step you should take is reach out to your IP. Your IP is like a friend ready to help you stand back up. They understand that life can be unpredictable. Maybe you had an unexpected expense, or your paycheck was late. Whatever the reason, your IP can’t help if they don’t know what’s happening.

Here’s how your IP can help:

1. Offer a Payment Break: If your financial hiccup is temporary, your IP might suggest a break from payments. But here’s something interesting: the length of this break depends on when you started your IVA. So, why does this matter? Well, it affects how long you can pause your payments without consequences.
2. Adjust Your Payment Amount: If your money situation has changed a lot, your IP might be able to reduce how much you pay each month. But here’s the catch: they can only do this by a certain percentage without asking your creditors. And yes, they have a say in this, too.

Consequences of Not Informing Your IP

If you don’t tell your IP about missing a payment, it’s like ignoring a small fire in your home, hoping it’ll go out on its own. But without action, that fire can grow. In the case of your IVA, this could mean your agreement fails.

This sounds scary, doesn’t it? It means your plan to manage your debts falls apart. Your creditors, who were waiting patiently, might not be so patient anymore.

So what exactly happens once you fail an IVA? Does this mean the contract is terminated? 

The Aftermath of Failing An IVA

If your debt repayment plan (IVA) doesn’t work out, you’ll get a letter saying it’s terminated. You’ll also get a report showing how much you’ve paid and how much is left. This can help you figure out what to do next with your debts.

The company that helped you with the IVA (IP) will let your creditors know the plan is over. This means you’ll need to talk to them directly to avoid any legal trouble. Since the IVA won’t protect you anymore, being clear with your creditors is important to stop them from trying to make you bankrupt.

The failed IVA will also be on your credit report. There might also be some fees you still owe to the company that helped you.

But is there something you can do once the IVA fails? Yes! But it’s not what you think it is. 

Steps To Take After A Failed IVA

So, your IVA has hit a snag, and now you’re standing at a crossroads. This isn’t where you wanted to be, but it’s not a dead end. Simply, follow the below steps:

Communicate With Creditors 

Communication is vital when dealing with creditors. It might feel scary to talk to them directly, but it’s really important. It proves that you’re committed to resolving the situation. 

Seek Expert Guidance

Now is the moment to gather your support system, and debt charities are like knights in shining armor during these tough times. Groups like StepChange or Payplan aren’t just people on the other end of the line; they’re your partners, your counselors, your navigators through the challenges. They offer more than just suggestions. So, don’t hesitate to reach out. 

Choose A Different Debt Solution

There are several alternative debt solutions aside from an Individual Voluntary Arrangement (IVA) that you can consider. Two of these options are:

• Debt Management Plan (DMP): Unlike an IVA, a DMP does not guarantee freezing your interest rates and charges. However, it enables you to gradually pay off your debt in manageable monthly installments. If you diligently adhere to your DMP, you might be able to negotiate another IVA with your creditors in the future.
• Bankruptcy: If your IVA fails, your Insolvency Practitioner (IP) or creditors may pursue bankruptcy proceedings against you. Despite the initial negative connotation, bankruptcy can be a viable solution depending on your situation.

It allows you to discharge your debts entirely, but it involves relinquishing assets, which will be liquidated to repay creditors. If you possess minimal assets like a house or a car, bankruptcy could be a viable consideration.

Conclusion

In conclusion, navigating missed payments in an Individual Voluntary Arrangement (IVA) can be daunting, but it’s crucial to recognize that it’s not the end of the road. Life’s uncertainties can sometimes derail even the best-laid plans, but how we respond to these challenges defines our resilience and determination.

When faced with difficulties in meeting your IVA commitments, remember that communication is your most powerful tool. Your Insolvency Practitioner (IP) is there to support you through these rough patches, offering solutions tailored to your unique circumstances. 

By keeping them informed of any financial hiccups, you open the door to potential solutions such as payment breaks or adjustments to your repayment plan.

Additionally, reaching out to debt charities like StepChange or Payplan can provide invaluable guidance and support during these challenging times. These organizations offer more than just advice; they serve as steadfast allies, helping you navigate the complexities of debt management and offering practical solutions to overcome setbacks.

In essence, facing a missed IVA payment head-on requires courage and resilience. It’s a testament to your commitment to regaining control of your finances and securing a brighter future. So, if you find yourself grappling with missed payments or the aftermath of a failed IVA, remember that you’re not alone. 

Take proactive steps, seek support, and embrace the journey towards financial empowerment. Your determination today will lay the foundation for a more secure and prosperous tomorrow.