Talk to your Supervisor first — do not just stop paying
The single most important thing to know: if you are struggling with IVA payments, contact your Supervisor immediately. Simply missing payments without contacting them is what puts the IVA at risk of failing.
Supervisors deal with income changes constantly. Losing a job, a drop in hours, an unexpected bill, illness, family change — all of these are common. The framework for handling them is well established.
Payment holidays and small reductions
Most IVA protocols allow a limited number of payment holidays (typically 6-9 months over the life of the IVA) without requiring creditor approval. These are useful for temporary situations — a period of unemployment while you look for new work, an illness, a family emergency.
Payment holidays extend the IVA at the end. If you miss 3 months, the IVA runs 3 months longer, not 3 months short. Your total contribution stays roughly the same overall.
Small permanent reductions in your monthly payment — for example if your income has dropped 10-15% and looks unlikely to recover soon — can often be handled by the Supervisor without a variation, if it falls within the discretion given to them in the original proposal.
Larger changes: a variation meeting
If your income has dropped significantly and looks permanent, the Supervisor may need to propose a formal variation. This involves calling a meeting of creditors, presenting the new financial situation, and asking them to vote on revised terms.
Creditors can accept the variation, propose amendments, or reject it. Approval requires 75% by value of voting creditors, the same threshold as the original IVA.
Common variations include: reducing the monthly payment, extending the term (e.g. from 60 to 72 months), converting to a full and final settlement using a lump sum from a third party (family member, inheritance).
When the IVA fails
An IVA fails when creditors terminate it — usually because payments have stopped, contact has broken down, or a proposed variation has been rejected.
Failure means the original debts revive with any interest that would have accrued during the IVA. Creditors can pursue you for the full remaining balance, less anything already distributed.
The Supervisor may petition for your bankruptcy at the point of failure if they hold that power in the IVA terms. This is not automatic but it is possible.
Options after IVA failure
You would be in the same position as before the IVA, minus the payments already made. The most common routes are: bankruptcy (if debts are still unaffordable), a new IVA proposal (uncommon — creditors are usually reluctant), a Debt Relief Order (if the remaining balance is under £50,000 and you meet other criteria), or negotiating individually with the largest creditors.
Because IVA failure loses you the money already contributed, IPs generally prefer to work hard on variations rather than let an IVA fail. Communication early is what makes this possible.
Windfalls during the IVA
This is the reverse situation — if you receive a windfall (inheritance, PPI refund, redundancy payment, gift), you must inform your Supervisor. Most IVAs require windfalls above £500 to be paid into the arrangement.
Some IVAs allow you to keep a portion; some require the full amount. The specifics depend on the protocol version and the terms of your proposal.