What Happens If I Miss IVA Payments?
Although Individual Voluntary Arrangement (IVA) is a voluntary debt repayment plan, it is a legally binding contract. This means you agree to make periodic payments to the IP so that they can forward the funds to your creditors.
If you fail to make an IVA payment to the IP without prior notice of delay, it could have some serious consequences. The IP may send you a notice to meet the obligation at first. They may also take legal action and void the contract, leaving you to settle your debt with your creditors on your own.
What Should I Do If I Miss An IVA Payment?
If you know that you will fail to make an IVA payment on time, you should contact your IP and let them know in advance. You should also tell them the reason why you won’t be able to make the payment and the reason must be a genuine emergency. For example, shopping or going on vacations do not qualify as emergencies.
Although your Insolvency Practitioner (IP) is not legally bound to allow you a break in payment, there is a chance that they will let you make a partial payment or delay the payment to next month.
The Notice of Breach
When you fail to make an IVA payment on time without prior notice, the best IVA companies will send you a formal notice of missed payment. The notice will ask you to provide a formal reason for missing the payment. In most cases, an IVA will give you three months to respond to the notice of breach.
If you fail to provide a response within this time or miss additional payments, you could face serious consequences including the termination of your agreement.
When a debtor is served a notice of breach, there is some room for renegotiation of debt with a new payment schedule. However, if the IVA is terminated due to non-payment or failure to respond to the notice, the IP will issue a certificate of termination to the debtor. The IP will provide the details of leftover debt from creditors and may also require payment of their fee.
If the debtor does not clear the fee, the IP may launch legal proceedings against them in court for a declaration of bankruptcy.
What If I Lose My Source of Income?
Losing your job or source of income is a very serious matter. If you are not getting paid, then you may need to take a break from your IVA payments until you can find another job. Make sure that you immediately contact your IVA companies to let them know the changes in your circumstances as they can guide you best.
In some cases, the debtor is allowed to take a break of up to six months of missed payments due to loss of their job. The number of payments you miss is added at the end of the IVA time period so that you end up making the same number of payments as originally planned in your IVA.
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