If you can no longer manage your debts, there is always a possibility that you may become bankrupt. There are options that you can explore before accepting this outcome, one of which is an Individual Voluntary Arrangement.
An IVA is a way to renegotiate your debts with your creditors and to propose paying them according to an alternative payment plan that is more manageable for you.
An Insolvency Practitioner (IP) will need to look at your case for an IVA to be pursued, and there are a number of things that they will take into account in terms of your financial situation.
IVA Payments
In order for an IVA to be successful, it is generally the case that you will be required to make monthly payments towards it for a specified period. It will have to be clear that you can manage this with your current income, and IP will consider your income, outgoings, assets and debts before advising what you should do.
Current illness
If you are suffering from some long-term illness or health issue affecting your income, for example one that prevents/ may prevent you from being able to work, there will be less of a chance that you will have an IVA accepted. You typically have to pay at least around £200 per month for an IVA and so your income will indicate whether or not this is going to be possible.
Illness in the Past
If you have had an illness in the past that has affected your income level, but are now in a position where you again have sufficient income, then your IP may include the details of what has happened in your IVA proposal. The proposal will be considered and voted on by your creditors, and if you have had some reason, for example illness, that has landed you in the financial situation you’re currently in, this may encourage creditors to take a more favourable view of your proposal.
Future illness
If you become ill once an IVA is already underway, and this illness affects your income, you should let your IP know about it as soon as possible. If your illness is likely only to be short-term, they may be able to arrange a payment holiday or perhaps reduced payments, in which case you may have additional time added onto the end of the IVA term. If your illness is long-term, then you may need to consider other options, which your IP will advise you about.
Illness can affect an IVA in a number of ways, and you should make sure you pass any relevant details of such issues in your life on to your IP, so that they can best advise you.