I can’t afford my IVA repayments - What should I do?

The IVA is a valid alternative to Bankruptcy for the peoples of the United Kingdom with unmanageable debts. The reason for this is that you do not risk the sale of your house or other property to satisfy the outstanding debts. In an IVA you have to agree upon certain terms and conditions which you must comply with for the next five years. No matter how much amount you have paid, all your outstanding unsecured debts are written off at the end of the IVA process. Minimums of seventy five percent of the Creditor’s votes are mandatory for an IVA acceptance.

However, due to current uncertain economic conditions there is no guarantee that your financial circumstances will stay the same during the process of the IVA. If you face such drastic financial issues, adhering to the terms of the IVA may not be possible. Luckily there are certain flexibilities in the process of an IVA. Even if you fail to make use of these flexibilities you still have other debt relief options.

This guide describes all these options for you to eliminate your debts legally and what to do if you can’t afford your IVA repayments.

Short Break in an IVA

This loosely defined term “Short break” in an IVA is a great relief option if you are facing an unexpected expense during the process of the IVA. For example, if you have to get your car repaired or home refurbished, you may not be able to pay the IVA installment for that specific month. Therefore, you badly need a break from the monthly installment course. Your Insolvency Practitioner and the Creditors must agree for the short break. If you have a genuine reason, the Creditors are usually sympathetic enough and they will grant you this break.

The option of Short Break must be mentioned in the terms and conditions agreed upon for the IVA process.

IVA Variation

If you need a longer break because of permanent change in the fiscal conditions, a short break is not suitable for you. In this case you have to go for an IVA Variation. In an IVA Variation you request your Creditors to agree on a revised proposal according to your current circumstances. The Insolvency Practitioner will mediate the Variation. A Variation meeting is fixed in which the Creditors and the Debtor meet in the presence of your IP.

The voting process is the same i.e. minimum 75% of Creditors must vote for the IVA Variation’s acceptance. If the Creditors do not accept your IVA Variation, you may come up with an alternate Variation and a different proposal.

Other Relief Options

There are certain conditions in which the IVA may fail. Your Creditors might not agree to the IVA or IVA Variation or you may not be able to pay the monthly installment. In this case you should consider alternate relief options available for your debt solution.

The two most common programs are: Debt Management Plan and Bankruptcy.
Let us discuss them one at a time.

Debt Management Plan

In Debt Management Plan the Debtor agrees to pay the outstanding amount over a certain period of time. This is different from an IVA in a sense that you have to pay the full amount owed. An insolvency firm usually acts as a liquidator between the Debtor and the Creditors. However, Debt Management Plan is available for the Debtors with large outstanding amount. You must owe this amount to two or more Creditors.

The Debt Management Plan is softer than the IVA and Bankruptcy. It also has less severe effects on your credit report and when you clear all your debts your rating improves automatically and you are eligible to obtain loans in the future.


In England and Wales a person is declared bankrupt only by the Court Orders. If you are bankrupted for the first time, the maximum period to receive your discharge is one year after the Court Orders. Without any doubt, Bankruptcy clears all your outstanding debts but it has severe effects on your financial conditions for up to ten years.

You may loose your property and assets including your personal residence. You cannot obtain any further loan, you cannot own a company and you may not act as the director.

Because of these restraints of the Bankruptcy you should always consider it as your last resort.

Make sure you get genuine advice and support by a licensed Debt Advisor or IP IVA, Bankruptcy and other debt solutions do not come for free and without consequences. Be aware of the costs involved and terms an conditions.

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