If you can’t make the payment to your Individual Voluntary Arrangement (IVA) this month, don’t panic! There may be options for you to cope and get your IVA back on track.
IMPORTANT in 2022 there is now a special case – if you cannot afford the repayments mainly because of rising prices and bills. For that situation new rules have been introduced and there is a LOT more help you can get – see Help with IVAs if you can’t pay because of the cost of living. The article here isn’t relevant if inflation is the cause of your difficulty.
This article covers the general case when you cannot afford the payments to your IVA for other reasons. This is very common – five or six years is a long time for everything to go smoothly in your life.
You do need to talk to your IVA firm even if you know the problem is very temporary and you can pay a few weeks late.
If your problem is longer term, you don’t have to wait for your annual review. Talk to your IVA firm about getting your IVA payments reduced.
Contents
What can cause problems for IVAs
Increases in your expenses can make your IVA payments unaffordable:
- a new baby, increased childcare costs, higher mortgage payments or many other cost of living increases ;
- large, unexpected expenditure such as a new boiler or expensive car repairs;
- having your car finance end. This is a very specific case, so read Car Finance in IVAs for what your options will be.
Other times a crisis happens because your income is reduced:
- losing your job or having your hours cut;
- lower profits if you are self-employed;
- being unable to work;
- having a cut in benefits.
Take a payment break
IVAs have terms included that allow some flexibility if you have an unexpected one-off expense or a drop in income that may be temporary.
This is often the ‘first response’ if your IVA seems to be running into serious problems – take a break and see if things improve by the end of it.
If you have a large unexpected expense, a payment break (or reduced payments) will let you save up the money to replace the boiler or even buy a cheap second-hand car if your car finance has ended.
Your IVA supervisor has to approve it, so you won’t be able to have a break to pay for a holiday.
Typical break terms
The common terms are:
- you can have payment breaks or make reduced payments for the equivalent of 9 months payments.
So if you could pay half your normal payments for a 6 month period, this would count as “3 months” of the maximum 9 months used. - this doesn’t have to be taken as a single break.
- the reduction in payments will be made up by adding on up to 12 months more at the end of your IVA.
If you have a minor problem don’t take a break for longer than you need.
Think of these automatic 9 months breaks as 9 important cards that you hold in your hand to get you through to the end of the IVA – if you waste a couple early on you won’t have them later when you may need them with a bigger problem.
Also it’s good for the IVA to end as soon as possible. When you are just a year in, it doesn’t seem important if your IVA will go on for another 4 years 6 months or 5 years – but it will later on…
And the longer the IVA goes on, the more chance of more problems occurring.
Not enough?
Payment breaks work well for short-term problems.
But they won’t help if the problem is general rising prices. There is no sign that your energy bills or grocery bills are going to drop to what they were in 2022.
So if your IVA firm suggests a payment break, ask yourself if anything will be different at the end of it… If the answer is no, tell your IVA firm you need a different solution, such as reducing your payments.
Payment breaks also work better if you are making large monthly payments. If you are paying £350 a month, then you can save up to replace something essential quicker than if you are only paying £100 a month.
Lower payments
Cut payments by 15%
Most IVAs have the following term, giving your IVA firm the discretion to reduce your payments if your expenses have risen or income has reduced:
The supervisor will be able to reduce the contribution by up to 15% in total (relative to the original proposal or last agreed variation) without referring back to creditors, to reflect changes in income and expenditure, such change to be reported in the next annual review.
This 15% reduction isn’t much. But sometimes an extra £32 a month can make all the difference between being able to continue with your IVA or not.
Larger reductions are possible but these have to be approved. Your IVA firm will propose a “variation” to your creditors who have to vote to accept it. The problem comes when your payments would be reduced below the amount that is practical.
Cut payments by up to 50% for cost of living problems
In June 2022, new guidance was issued to IVA firms about customers who are struggling with the IVA payments because of the large rises in bills and prices.
This is MUCH more generous – no-one wants thousand sof IVAs failing because of this.
See Help with IVAs if you can’t pay because of the cost of living which looks at the help that is available and talking to your IVA firm about this.
Redundancy
You can normally keep 6 months worth of pay from your redundancy pay and the rest is paid into your IVA for your creditors. That six months money will let you carry on paying your IVA while you look for another job.
See What happens in an IVA if you are made redundant for more details.
What happens if you can’t get back on track
The IVA gives your IVA firm a lot of discretion about what can be done if your IVA is failing. Here is a typical term:
if the Supervisor feels it appropriate seek creditor views to do one of the following:
- vary the terms of the arrangement, or
- issue a certificate (“Certificate of Termination”) terminating the arrangement by reason of the breach; and/or
- present a petition for the individual’s bankruptcy
That doesn’t give you much of a clue about what will happen and may sound very scary. Let’s look at the three options.
Make you bankrupt
If your IVA is in trouble because you have lost your job or your income has been reduced, it is very unlikely that your IP would consider bankruptcy.
This option is intended more for “won’t pays” rather than “can’t pays”. For example, if you were made redundant then got another job and didn’t tell your IP about your redundancy money.
Vary the terms – completion on the basis of fund paid to date
The best alternative for you, if your creditors will agree, is for your IVA firm to propose a variation that your IVA is just completed even though you haven’t got to the end. Your IVA firm may use the phrase “on the basis of funds paid to date” – this means you don’t have to pay any more.
This is more likely to be agreed the closer you are to the end of your IVA. In your last year it is very likely, in your first year it would be very rare.
Other variations – lower payments, longer term etc
If you can make lower payments, these could be proposed, perhaps also extending the term of your IVA. But be careful of committing yourself to something that is just going on for too long, especially if you think your circumstances are going to get more difficult over the next few years.
It could be better for you to choose to let your IVA fail, see below, especially if you are less than halfway through your IVA.
Could a relative or your partner make an offer to settle the IVA? Read How much should I offer to settle my IVA early? if you think this might be an option.
If you have a house with equity, you may want to consider selling the house to end the IVA. If one of the reasons you have financial problems is the high cost of your mortgage or secured loan, this could be a good idea. But read Can I sell my house to end my IVA? which looks at how this should be done and the possible problems.
Terminate your IVA (“fail your IVA”) – sometimes a good option!
If there are no ways to rescue your IVA and your IVA firm doesn’t want to pay to make you bankrupt, then your IVA will fail. In 2020 more than a quarter of IVAs were failing even before Covid-19 hit.
This isn’t always a disaster.
There are many people that have been “sold” an IVA that was always going to prove difficult and some of them should have been advised to go for a Debt Relief Order or bankruptcy at the beginning, instead of an IVA.
- Read Should I switch to a DRO from an IVA? which looks at whether you should make the positive choice to do this. Your IVA firm may be talking about payment breaks and extending the term of your IVA, but if you are currently struggling and meet the DRO criteria, that could be a much better option for you. And DRO eligibility criteria have been relaxed, so you may now qualify for one even if you didn’t when your IVA started.
- Bankruptcy isn’t nearly as scary as people think, most people don’t have to make any payments at all. Unless you have a house with equity you should seriously consider it.
What should you do now?
If you have an IVA and you are struggling, have a look at the terms of your IVA and see which of the points listed here are included in your agreement. Then call your IVA firm and discuss how to proceed.
If that seems too scary, talk to a good debt adviser first, so they can help you see what your options are.
Your 5 options when an IVA fails
Inflation? – get lower IVA payments
What happens in an IVA annual review
Eric says
have you seen the below proposal from creditfix.
https://www.iva.co.uk/forum/creditfix-and-the-cost-of-living-t92325
locking people in extended lengths cannot be right. Views?
Sara (Debt Camel) says
I know Creditfix are going back to a lot of people they think maybe in difficulty.
One of the people replying (Foggy) gave what is probably a good answer in that case – as he was already thinking of making a settlement offer, get the IVA changed to the lower payments and then in a while make a much lower settlement offer.
In other cases it will be worth looking at if the person qualifies for a debt relief order – IVA firms aren’t always very good at spotting this…
John R says
Hi Im coming into my fifth year but are encountering issues with creditfix which the main one is that recently the cost of living rises have caused a problem.
In the last few weeks I had done a review which showed up we’re I’m paying 252 but it needs to go down to 101 per month but creditfix have said they would need to extend the lva between 12 or 24 months and I don’t want to do this.
So if I say no what do you think they would possibly do.
Sara (Debt Camel) says
So your IVA is a 5 year IVA? How large were the debts going into it? Has your payment ever been increased?
Also does this review take into account the fact your energy bills will be going up again in October?
John R says
Hi thankyou for getting back to me and I could not find your answer.
My debt was originally 46000 and no they haven’t said anything about the October bills. But since I sent you the original email things have become worse.
1,i numerous amount of emails saying I’m not happy to know cancelling my payment card in which I have also been cut off and haven’t had a reply to any emails in 2 and a half weeks. So I believe I’ve been treated appallingly and want out to find another solution.
Ive paid 12,250 to date and 4 and a half years.
Sara (Debt Camel) says
Ok so this week there has been news from the Insolvency Service about help for people with cost of living problems. It says that
– creditors should normally agree to accept a reduction of 50% in the payments and there should be an extension f no more than a year.
But you need yours to drop by more then 50%. And if Creditfix take the October increase into account (it’s only 3 months away) then that may well be below £75 which means Creditfix may think it isn’t sustainable.
Are you renting or buying? Do you have a car worth more than £2000?
John Robertson says
That is interesting they haven’t said anything about that and I did ask about ending it early with payments made to date and before they said they won’t do that because of the amount of debt we have.
Also the car is worth around 5000 so would they use that because we need it for work and have an autistic adult son to get about.
Also we rent our property.
Sara (Debt Camel) says
is your son in receipt of PIP?
John says
Hi and no he doesent have pip but he does have employment and support allowance.
we have tried for PIP in the past and have been refused. we did not appeal the PIP rejection.
John Robertson says
what way do you think creditfix will go on our debt.
Sara (Debt Camel) says
I have tidied up some of the thread as it was getting consusing.
I am not avoiding your question – well I am, but the details here matter which is why I keep asking more things…
You said at the satrt you are coming up to your fifth year.
But then you said (I think) that you were 4.5 years in. Is that right
Is this a 5 or 6 year IVA?
John says
Hi and it’s a 5 year term and we started it in October 2017 but wife was made redundant back in October 2021 and was aliud to keep up to 6 months which would work out just right but a job came up a month earlier so it left a 1000 pound excess which we didn’t have so they have extended it to march 2023 which we said was OK.
But then the cost of living struck and is getting worse and as I said before they know want to extend that between 12 or 24 months so I’m not prepared to go on that long it’s very difficult.
Sara (Debt Camel) says
I have a new article which looks at this sort of situation with the new Guidance to IVA firms that was published at the end of June: https://debtcamel.co.uk/help-ivas-cost-of-living/
Tony says
This happened to me near the end of mine, I had enough so I told them that I was not paying any more then the 5 years, take me to court if they have too, after they spoke to the creditors they all agreed to calling it a day after the 5 years was payed for. I am not saying this will be the same for everyone but this is what i done.
Dawn says
I have a iva I’m struggling to pay at the moment my ex partner was paying we spilt up 3 weeks ago I’m getting some money from my dad who passed away last year not sure when it will be shouldn’t be long now many thanks
Sara (Debt Camel) says
Sorry to hear about your dad.
Can you give me some details, rough numbers are fine:
How long ago did your IVA start? Was it 5 years or 6?
How large are your monthly payments? Can you actually afford to pay anything at the moment?
Are you renting or buying?
How large were the debts that went into your IVA? were any of these joint debts with your ex?
How much might you get from your dad’s estate?
John Robertson says
Hi Sara this is a update about my iva I managed to talk to a insolvency manager yesterday and at least he was helpful.
He simply said just send him a update on my income and expenditure because I had said to him about settling on payments made to date and he agreed and also said we will stop July’s payment to help while we waiting for answer.
So how long can this be till I get a answer.
Sara (Debt Camel) says
I’m not sure if this is being proposed to your creditors or if Creditfix are just going to think what to do?
John Robertson says
Well I put in a email a week or so ago I want to cancel iva but 1st of all can you ask them to finish iva with payments made to date so he rang me and said send the income and expenditure forms then let me see if I can get this finished then said I will cancel July’s payment while you are waiting.
Or do you think he is playing games.
Sara (Debt Camel) says
I doubt he is playing games. But it may take some time for them come back with a Yes we will propose this to your creditors or No we won’t
Sara (Debt Camel) says
PS I will transfer these threads in a day or so to my new article on this as they are directly relevant to it https://debtcamel.co.uk/help-ivas-cost-of-living/
John Robertson says
He has asked for the variation to be consented to and he will get it sorted out today and sent of.
Also I forgot to say he has asked me to to put a good review on Trust pilot because I had put comments on there how bad they were which I find odd.
Sara (Debt Camel) says
Good! Fingers crossed for you
I would reply that you will do that when your IVA is completed on the basis of the funds paid to date… but otherwise you do not feel you have been treated fairly.
Dee says
I have an IVA with my husband, 2y review coming close. As many of us, struggling to pay and both cars,.really old at breaking point. When this happens (not if) one of us won’t be able to work. What can I do? Spoke toy adviser already and weren’t very helpful. It seems they don’t care that with a car we cannot work and won’t be able to afford the rent , bills or Iva payment at all? We pay 146 a month for an 18k debt. Can you suggest anything please
Sara (Debt Camel) says
So ignoring the cars issue for the moment, are you struggling to pay the £146 at the moment because of rising bills and proces?
Dee says
Yes I am. On top of that our rent agreement coming to an end and not likely to be renewed
Sara (Debt Camel) says
Ok then you need to read https://debtcamel.co.uk/help-ivas-cost-of-living/ which covers problems casued by inflation.
If both of your cars are worth less then 2k each (are they?) then it sounds as though both of you may be eligible for a debt relief order. Read https://debtcamel.co.uk/debt-options/dro/ which explains what a DRO is.
If you think you may now qualify for one each, then you could ask for your IVA to be failed and get a DRO, which would mean 1 up front payment of £90 each then no monthly payments at all.
That will be a lot better than your current IVA. Even if they cut the payments to £90 a month you still can’t afford them.
BUT THERE MAY BE AN EVEN BETTER OPTION. As it says in that article, if you qualify for a DRO now, then your IVA firm can propose to your creditors that your IVA should not fail but should complete now “on the basis of funds paid to date” – which means you don’t have to pay any more but your debts will be written off off and you don’t need a DRO.
This doesn’t help the problem you have coming up with your cars . Or needing a new tenancy. An IVA makes both of those very hard. But at least if you don’t have to make the IVA payments, you have more money for car repairs or to save up for a cheap old car as a replacement.
I suggest you talk to your IVA firm straight after reading that other article. There is no reason to delay.
Let me know what happens?
Julie says
I am in a 5 year Iva through creditfix. Started April 2021. I was working part time and got a small top up from universal credit. They said originally my outgoings were more than my income, unless I said my partner paid me 300 a month towards rent and he lived with me? I pay £114 a month and still owe £11,508.01 but apparently 40% off that will be written off, is that correct? My main question is, would I be eligible to for a DRO? And how would I find out?
Your answer would be most appreciated. Thank you in advance
Sara (Debt Camel) says
“They said…”
Was this Creditfix? Or another company who told you what to say to Creditfix?
I assume the £114 a month is very hard to manage?
Any says
I am in a 5 year IVA with credifix, just done my first year. £14000 debt pay £90 a month I’m a single parent. I was working 2 jobs and now only working one. Could I change and go bankrupt instead as that seems to be the best option when I’ve read into it. Thank you.
Sara (Debt Camel) says
You could stop paying so the IVA fails and then go bankrupt. But first talk to National Debtline on 0808 808 4000 to see if you would be eligible for a Debt Relief Order – it’s a simplified form of bankruptcy where the fee is much lower!
EM says
I’m In a six year IVA term at year 3 and 2 months.
I want to pay off my IVA as I’m moving job roles and will lose 7k ! I’d also like to have a baby and return to work part time. I owe 4569k but spoke to someone today they say early settlement will be 5561k .
I just want it gone ! I’ve been struggling the last year with all the strike action and this doesn’t seem to resolving anytime soon!
They have asked for person who’s gifting the moneys ID
A picture of the amount in the bank
And three months worth of statements from me
Why do they need my statements ?
I am going to offer 5561k
Should the gifter include details such as my income going down and current issues such as strikes.
I won’t be able to afford it if they say no !! So what will my options be should I include that in the details ?
Sara (Debt Camel) says
how large are your current monthly payments?
E.M says
140 approx
Sara (Debt Camel) says
Why was your IVA 6 years? Do you own a house with equity?
They want to see your bank statements to see if you have recently been having more income than at your last review.
Have you had your 3rd year review?