A payment break can be used to manage unexpected expenses during an IVA. Normal payments into the Arrangement are temporarily suspended. The money saved can then be used to cover the unforeseen cost.
- What is an IVA Payment Break
- When are you allowed to have a break from your IVA payments?
- Do you have to pay back the payments you miss?
- What if you struggle with your IVA payments every month?
What is an IVA Payment Break?
No matter how carefully you plan unexpected expenses do come up. These could be the result of anything from a large bill such as an unplanned car repair to a short term period of unemployment.
You may have put aside some savings during your IVA. However more often than not the amount will be insufficient to pay the unforeseen expense.
An IVA payment break (sometimes known as a payment holiday) is designed to help in these circumstances. It is a temporary suspension of your payments. Instead you can use the money to cover the emergency.
If you have unexpected expenses during your IVA do not try and borrow to cover these. A payment break can help you get together the money you need without putting the Arrangement at risk.
When are you allowed to have a break from your IVA Payments?
You will normally be allowed to take a payment break from your IVA whenever you need one. However you must have a good reason such as an unexpected and unavoidable expense.
Before missing any payments you must first get the agreement of your Insolvency Practitioner (IP). They will agree the number of months you can miss with you. This could be one or more if you have larger expenses to pay for.
The latest version of the IVA Protocol terms and conditions (revised June 2016) allows your IP to grant up to 9 months of payment breaks during your IVA. However there must be a satisfactory reason.
You must not stop paying your IVA without the prior agreement of your IP. If you do your Arrangement will fall into arrears. There is then a risk that it might fail.
Do you have to pay back the payments you miss?
You will have to make up any payments you miss as a result of a payment break. This is normally done by adding them to the end of your IVA.
Generally speaking if you take a payment break your IVA will be extended by the number of payments you missed.
If your payments have increased by the time you reach the end of the Arrangement the missed payments could be repaid more quickly.
You should not be expected to make up the payments you miss by increasing your ongoing IVA payment amount. This would not be affordable or realistic. Rather the payment period will be extended to cover the shortfall.
What if you struggle to pay your IVA every month?
An IVA payment break is designed to overcome unexpected expenses or a short term cash flow problem. It will not help if you have more permanent payment affordability issues.
If you are struggling to pay your IVA every month the problem may be more fundamental. Rather than it being a result of an unexpected expense it is likely that you simply cannot afford to maintain the Agreement at the current level.
In these circumstances it is vital that you speak to your IVA company. If your income has permanently fallen or your expenses have increased you may be able to reduce your ongoing IVA payments.
If you are struggling to pay your IVA every month a payment break is unlikely to be the answer. You must speak to your IVA company about a variation of your Agreement to permanently reduce the amount you pay.