IVAs are carried out within the legal system, and therefore comprise a legal contract. However, this does not mean that the payment amounts are set in stone. Your Insolvency Practitioner has the responsibility not only of setting up the IVA, but also of administering it whilst it is in progress. This means that they will keep an eye on your finances throughout the IVA period, and may suggest changes to it at any point.
Your IVA is initially based on your finances as they stand at the time you propose it. The principle is that you cannot meet the requirements of your current debt agreements, and are proposing the IVA payments as an alternative. Your creditors accept this on the basis that you simply cannot meet the debt agreements that you have currently, and are proposing to pay them what you can.
If, during the IVA, your circumstances change, it is inevitably the case that what you can afford to pay towards the IVA will also change (either for better or worse). In the case that your finances change for the worse, your IP may have to step in and help.
The IP will do whatever they can to keep the IVA from failing, although if you simply cannot make the payments, there is a chance that the arrangement will indeed fail. In this case your creditors will then be free to take action against you for the debts concerned. For this reason, it is hugely important that you speak to your IP as soon as you find you are going to have trouble keeping up with your IVA payments.
If your finances deteriorate, there are a number of things the IP can do to alleviate the situation. If your finances are likely only to be suffering for a temporary period, a payment holiday for your IVA may be arranged, in which case the overall term of the IVA will probably be increased.
In certain circumstances, your IP may be able to renegotiate your IVA terms by contacting your creditors on your behalf. If they do agree to reduced payments, for example, they may request further changes such as an increase in term, or releasing equity from any property you may have.
Your IP will always make sure you understand fully the implications of any proposed changes to your IVA before any final decisions are made. The IVA is a contract between yourself and the creditors, and you therefore have to accept any terms within it for it to come into force.
No one knows what’s going to happen in the future, and when you’re in the position of having unmanageable debts this is doubly so. When you propose and sign up to an IVA, you can’t tell whether things are about to get better or worse. The IVA system has built in flexibility for this reason, and IPs are required to act responsibly when it comes to administering the arrangements.
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