Variation of an IVA
Five years is a long time. When someone signs up to an IVA (Individual Voluntary Arrangement), they can’t know what the future holds, and creditors understand this. So although anyone in an IVA is required to follow the rules laid down in the agreement, those rules aren’t set in stone.
Before the IP writes the original IVA proposal, they always take a good look at any changes that might happen the over the next five years. But life is full of surprises – and sometimes, something happens that no-one expected. If it’s a big change, the person might need to ask for a ‘variation’ of their IVA: a legal process that’s used to change the existing arrangement.
Unexpected events
Most creditors will consider reasonable changes to the IVA if it’s the best way of handling some unexpected event like a change of job, a pregnancy or a divorce.
They might also accept a new agreement if the person comes into a lump sum of money which lets them make a ‘full and final’ settlement that brings the IVA to an early (but successful) finish.
How does it work?
The job of an Insolvency Practitioner (IP) isn’t over when the original IVA is accepted by creditors. All the way through the IVA, they’re there to supervise the arrangement, handle issues that might come up – and if necessary, propose a variation.
So if someone’s circumstances change drastically, they can ask the IP to create a new proposal detailing the changes they’d like to make to the IVA (for example, they might ask to pay arrears at the end of the five-year period, so the IVA basically runs a bit longer).
As with the original IVA proposal, the report is sent to the creditors, who have the right to accept it, reject it or request changes to it.
If it’s accepted, the IVA can continue under the new terms.
If it’s rejected, the person has a choice to make. They can either carry on with the IVA under the original terms or opt for an alternative such as bankruptcy or a debt management plan.
An important part of IVAs
Some people think of IVAs as inflexible and uncompromising, but it’s important to realise there’s room for some ‘give and take’. If someone runs into problems 3 years into an IVA, they’ve already put a lot of effort into it, and so have the IP and the creditors – it’s in no-one’s interests to let it fail.
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