IVAs (Individual Voluntary Arrangements)
are specialist types of debt
management agreements that are legally binding. This means that you, and your creditors, are legally bound to stick to the initially agreed terms. If you don’t and you do something to default on your IVA
then you may well suffer various consequences.
The most common way to default here is to stop making your payments as outlined in your IVA contract. Bear in mind that this is a contractual agreement here and not an informal agreement between you and your creditors. So, you cannot simply expect to be able to stop meeting your IVA commitments and get away with it.
In general terms if you fail to make timely payments to your IVA as specified in your original contract then measures will be taken. Your creditors don’t have to take these measures – you will have to answer to the Insolvency Practitioner that you used to set up your agreement in the first place.
You shouldn’t simply assume that nothing can be done here
- As soon as you break your agreement and default on your payments your Insolvency Practitioner will contact you to find out what is going on. If you cannot come up with a valid reason for defaulting here or refuse to communicate with them then he/she may simply apply to have you declared bankrupt by issuing a certificate of default. The bankruptcy process in itself will be much tougher on you than your IVA and may well see you lose specific assets that your IVA ring-fenced so this really is a route best avoided wherever possible.
In some cases you may well find that your circumstances change beyond your control and you find it difficult to meet your commitments here. You may, for example, lose your job or get your hours and with them your pay cut at work. The vital thing to remember here is this is not a reason to simply stop making your IVA payments – you should get in touch with your Insolvency Practitioner as soon as your circumstances change to see what can be done to help you out.
. You will generally find, if you have genuine financial difficulties meeting your obligations, that you will be given practical advice and help. In certain circumstances, for example, your Insolvency Practitioner will be able to renegotiate your IVA deal for you with your creditors or you may be able to extend the terms of the deal.
The main point here is that defaulting on your IVA is not the answer. You’ll get more goodwill and better help if you talk to your Insolvency Practitioner as soon as you know that problems are likely to occur. Unlike other forms of debt management an IVA is a legally binding contract that you and your creditors agree to stick to. So, if you default here then they may also decide to start operating outside the remit of the agreement as well.