If you’ve entered into an Individual Voluntary Arrangement (IVA) to clear your debts, a major life change or event can have a significant impact on your ability to make your monthly payments. This article from bankruptcy advice gurus, Bankruptcy Clinic, explains what might happen if you experience a life change during your IVA.
- Losing your job
If you’ve been sacked or resigned voluntarily, you probably won’t be eligible for any benefits for a while. This will obviously have a drastic impact on your disposable income and, in turn, your ability to meet your IVA payments. Talk to your IP straightaway – they may be able to negotiate a payment break with your creditors to give you some breathing space, or at least reduce the amount of your monthly payments.
On the other hand, if you’ve been made redundant, you may qualify for government support whilst you look for another job. In this case, your IP will reassess your ability to pay based on your new disposable income and your payments could stay the same.
The situation will be different again if you’ve received a redundancy payment. You’ll be expected to pay this into your IVA, although you may be allowed to keep some of it for essential living expenses. If the payment is large enough to clear your outstanding debts, then your IVA will finish early and you’ll be able to keep any leftover monies once your IP’s fees have been settled.
- Getting a new job
Whether it’s a promotion or a move to a new firm with a higher salary, you’ll need to declare any increase in income to your IP. Your monthly IVA payments may go up as a result. However, if your new job involves a pay cut, the opposite may happen if your creditors agree to reduce your payments.
- Receiving a windfall
The principle here is the same as with a redundancy payment, whether it’s an inheritance, lottery win or mis-sold PPI compensation. You can ask your IP to let you keep some of the money for essential costs, but this is unlikely. The chances are that most or all if it will go to your creditors and, unless your debts are cleared in full, your IVA will continue.
- Becoming pregnant
As anyone with children will tell you, having a baby is an expensive business. From maternity wear and kitting out the nursery to feeding, clothing and educating your offspring, your disposable income will take a serious hit. Of course, the changes to your finances will vary depending on whether or not you’re employed, how much maternity pay you’ll get if you work and for how long, how much time you want to take off (if you go back at all) and what benefits and tax credits you’ll receive.
The presence, or otherwise, of a partner who can contribute to maternity and childcare costs will also make a big difference. All these are aspects that you’ll need to discuss with your IP so they can reassess your disposable income before and after the baby is born, and decide whether or not your IVA should be varied.
- Getting married
The situation here depends on whether you and your partner already live together. If so, their income will already have been considered by your IP. Therefore, getting married won’t, in itself, mean your IVA needs to change. However, if you move in together after getting married (or start cohabiting), your IP will need to reassess your finances to take account of your partner’s income. As a result, you could see an increase in your IVA commitments.
One area you don’t need to worry about is your partner becoming jointly responsible for your existing debts once you move in together or get married. Unless they were jointly named on the credit agreements in the first place, there is no legal obligation for your partner or spouse to repay debts listed in your sole name.
- Separating or getting divorced
Not surprisingly, getting divorced or separating generally has the opposite effect on an IVA to getting married or cohabiting. Whether you start living on your own, move in with relatives or start a new relationship, your disposable income will probably change so you should discuss this with your IP.
What if I can no longer afford my IVA after a life change?
Even if you’re given a payment break and/or your monthly payments are reduced, you may find that you still can’t afford your IVA commitments. If this happens, your IVA will probably fail and you’ll need to find another solution – usually a Debt Relief Order (DRO) or bankruptcy. Your IP may help you decide what to do, but if not, you can contact Bankruptcy Clinic for advice.
Bankruptcy Clinic is here for you
We’re here to answer all your questions about your IVA and how a major life change might affect it. And if your IVA does fail, we’ll help you find an alternative way to deal with your debts so you can get free from them and move on.
Get in touch today
Call Bankruptcy Clinic on 0808 168 7389 or 01625 462 770 or complete our online enquiry form with your queries.