If unexpected expenditures come up during your IVA you should consider a payment break. This will help manage the financial emergency without borrowing more.
Included in this article:
- How does an IVA payment break work?
- How long can the break be for?
- What happens to the payments you miss?
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How does an IVA Payment Break work?
A payment break means you can temporarily suspend your monthly IVA payments. Instead of paying the Arrangement, you save the money and use it to cover an unexpected financial emergency.
Before you stop your payments, you must first get written agreement from your Insolvency Practitioner (IP).
You should be allowed to take a break if you are facing short term cash emergency. For example if you need to repair your car, replace a washing machine or your income has fallen due to a period of maternity.
However a payment break is not suitable if you have a long term change in circumstances or are simply struggling with the Agreement.
In these circumstances you need to talk to your IP about reducing your monthly payments.
Struggling to get your head round all of this? We can Help. Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.
How long can the break be for?
The length of the payment break can vary depending on the amount of money you need to save. It could last for a single month or a number of months. Ultimately you will need to agree it with your IP.
Where your agreement is based on the IVA Protocol the number of months break you can take in total is prescribed. If the Arrangement started before June 2016 it is 6. If it started after this date, then as standard you are allowed to take up to 9.
Having said that the length of any break is always down to your IP’s discretion. Where required and reasonable it may last longer than 9 months although the agreement of your creditors might have to be sought.
It is possible to take more than one break during your IVA. It is not guaranteed that you will have only one financial emergency during the course of the Arrangement.
What happens to the Payments you miss?
You have to make up the payments you miss due to taking a payment break. Most commonly they will be added to the end of your Arrangement.
It is important to understand that taking the break will mean the length of your IVA will be extended. If you miss 9 months payments during the arrangement these will have to be added to the end.
Your payments may increase during the Arrangement because your financial circumstances have improved. Any payments added to the end are payable at this rate. Not the lower rate of the payments missed.
You should not have to make up payments missed due to a break by increasing your ongoing payments.
Struggling with your IVA payments and need advice? We can Help. Give us a call (0800 011 4712) or complete the form at the bottom of this page. It’s free and confidential.