Problem IVAs

Introduction

An IVA debt solution often lasts 5 years or more, that can be a long time to expect nothing to change in your financial circumstances. However, there are usually quite a number of flexible options to consider during your IVA that you can look at with your Insolvency Practitioner (IP). Usually, a supervisor or supervision team looks after your ongoing IVA, you will probably need to contact them to discuss flexible options in detail.

Occasionally, consumers in an IVA experience problems in their IVA that can't seem to be sorted, this guidance highlights the flexible options available and how you can go about resolving problems with your IP.

Check your IVA Terms

Read the original IVA proposal, & Chairman’s report, check the terms & any modifications. You can get copies from your Insolvency Practitioner (IP). Check if you have a straightforward consumer protocol IVA, if not you may not have the same flexible options during your IVA.

Review annual contribution statements & check communications from the IP to make sure you have all your facts straight.

Understand your Obligations

Your IVA proposal may not stay the same. If your income goes up, you might have to pay more each month.

  • You must declare pay rises, bonuses, overtime & windfalls, e.g. PPI refunds/Redundancy/Legal compensation.
  • Your IP will review your income & expenditure every year & if you have any extra money they didn’t know about, your payments might go up &/or your IVA term might be extended.

Review your Options & Rights

If your income unexpectedly drops, you can discuss options with your IP:

  • Payment break – usually up to 9 months. Payment breaks will extend your IVA term.
  • Monthly payments can be lowered by up to 15%.
  • Variation to lower payments by more than 15%. (Variations require another creditor vote)
  • Variation to close the IVA with a one off lump sum.
  • Variation to close the IVA on payments paid to date.
  • Ask the IP for the IVA to be failed & choose a more suitable debt option.
  • Make a complaint to your IP. If unresolved, you can escalate to the Insolvency Service:

https://www.insolvencydirect.bis.gov.uk/ExternalOnlineForms/InsolvencyPractitionerComplaint.aspx

See our COVID section for additional terms during the pandemic.

The Role of your Insolvency Practitioner

IP’s are qualified & regulated professionals & are required to maintain high standards.

Although IP’s are friendly, they’re not your friend so to speak. Your IP has to make sure payments to creditors are maximised. IP’s don’t want IVA’s to fail, it’s best to contact them if you’re struggling.

Your ongoing Affordability

Finances can go up or down during an IVA. A pay rise might not give you more disposable income because your expenses can go up too. IP’s use spending guidelines to check what you can afford:

  • Check your original income & expenditure as a guide to what was originally accepted
  • Review your bank statements & amend any increased expenses, e.g. Utility/Food bills

Were you advise properly before entering an IVA?

If an IVA fails, it may be due to an income shock or due to initial poor advice. If you think you’ve not been advised properly, complain to your IP first. Consider how the complaint can be resolved e.g.:

  • Compensation &/or partial/full refund of fees
  • Closing the IVA on sums paid to date
  • Terminating the IVA to apply for an alternative debt solution

Don’t forget that you signed official documents to proceed with an IVA, so you need to present clear & valid arguments as to how & why you feel you’ve been badly advised.

Check completion/termination of your IVA

Once you’ve completed your IVA or it’s failed, you need to check your IP ended the IVA properly:

  • Upon completion you’ll receive a ‘completion certificate’, if you don’t get it, contact your IP.
  • If failed, you’ll receive a written termination & a statement of outstanding debt balances. If you don’t get them, contact your IP.
  • Your Individual Insolvency Register record should be removed. If not, contact your IP. It takes up to 3 months for the Insolvency Service to remove the record.

https://www.insolvencydirect.bis.gov.uk/eiir/

  • Check your credit reference agency (CRA) records are updated. You can request amendments & corrections yourself. The 3 main CRA’s are: Experian, Call Credit & Equifax.

https://www.moneyadviceservice.org.uk/en/articles/how-to-check-your-credit-report

  • If your creditors continue to pursue a debt after your IVA completion, tell your IP, they will contact the creditor on your behalf.

During the COVID-19 Pandemic

Guidance has been introduced that allows for flexibility to be applied to IVAs which are already being supervised & were drafted in accordance with the current protocol or previous versions by the IVA Standing Committee & new IVAs that are drafted from 20 April 2020. The guidance applies until 20 October 2020.

New IVAs

  • Any COVID related debt and/or income shock should be fully explained in the IVA proposal
  • Income from government backed financial support schemes can be included as income in an IVA proposal


Existing IVAs - Temporary Extended Terms for the Straightforward Consumer IVA Protocol

  • Up to 25% reduction to repayments for 3 months if suffering a COVID related income shock and/or sudden expense (details will need to be give to your IP about the inability to pay)
  • The 3 month extension is additional to the standard repayment holiday terms but must not exceed 12 months in total (any repayment holidays agreed will be payable in the future)
  • Critical workers are excluded from the protocol’s overtime rule during the COVID pandemic
  • IPs have discretion to suspend the issue of Breach notices
  • IPs have the discretion to not take a redundancy payment in excess of 6 months net pay into account
  • IPs must not realise a consumer’s home equity during the pandemic unless the consumer agrees to proceed

Other Debt Options

If you can’t sort the problems in your IVA or an IVA proposal is unsuitable or has been rejected by creditors, please remember that there are other debt options available to help you.

Our Money Advice Hub Debt Options Guide runs through the debt options with pros & cons, please take a look at these & then seek free debt advice from an experienced debt adviser to review your situation.

Please take a look at our other resources:

To review your income and expenditure please try our Online Budget Tool