An Individual Voluntary Arrangement (IVA) is designed to help you manage your debts by making affordable, fixed payments to your creditors over a set period, usually five to six years. However, life is unpredictable, and your financial situation may change during this time. So, what happens if your circumstances change while you’re in an IVA?
Changes in Income
If your income increases or decreases during the course of the IVA, you should immediately inform your insolvency practitioner (IP) / FCA Regulated Debt Advisor. For example, if you lose your job, experience a drop in income, or face unexpected expenses like medical bills, your FCA Regulated Debt Advisor can renegotiate the terms of your IVA. This could mean reducing your monthly payments temporarily or extending the IVA period to ensure that you can continue meeting your obligations without defaulting.
On the other hand, if your income increases—through a pay rise, bonus, or inheritance—you may be expected to contribute a portion of this additional income toward your IVA. Your FCA Regulated Debt Advisor will assess your financial situation and decide how much of the extra money should be paid into the arrangement.
Payment Breaks
If you’re unable to make payments due to short-term financial difficulty, you might be eligible for a payment break. Most IVAs allow for a break of up to six months, depending on your circumstances. Your FCA Regulated Debt Advisor will assess whether this option is viable and what impact it may have on the overall duration of your IVA.
Major Life Changes
Significant life changes—such as serious illness, divorce, or the birth of a child—could also affect your ability to stick to your original IVA terms. In these cases, your IP may offer more flexible options, like a variation meeting where creditors agree to modify the IVA terms to reflect your new circumstances.
Conclusion
It’s crucial to keep your insolvency practitioner informed of any significant changes in your circumstances during an IVA. They can adjust your payment plan or even renegotiate terms with your creditors to ensure that your IVA stays manageable and that you can complete it successfully. Open communication is the key to navigating any challenges that arise during the IVA process.