When we talk of a failed IVA we're normally referring to an IVA that fails to make it to the end of the agreed term as set out in the proposal. All IVAs are based on the personal circumstances of the applicant and if these circumstances change, the basis on which the IVA has be formed will change too. If these changes are substantial enough and for the worse, the IVA will be vulnerable to failure.
Failed IVA creditor meetings do happen from time to time and, where no agreement is reached between the parties, it's inevitable the Creditors' Meeting will fail. In most cases the insolvency practitioner would simply adjourn the Creditors' Meeting prior to the IVA being failed, because adjourning the meeting creates a 14 day period during which negotiations can take place. Many Creditors' Meetings that get adjourned will end successfully in agreement but, inevitably, there's a few that wont.
Indeed, many failed IVAs can be re-proposed almost immediately. The suitability of re-proposing the IVA will be determined by first establishing why the original IVA failed to meet the creditors requirements. It may be a simple case of making amendments to the first proposal and rectifying any issues. Once this has been done there's every chance creditors will agree to a re-proposed IVA. If you feel your chances would be improved by changing to another IP at this stage you are free to do so.
Most failed IVAs happen as a result of a significant and detrimental change to the applicant's circumstances. Since the introduction of the IVA protocol in February , options are available to assist with temporary changes in circumstances, such as payment breaks and payment reductions. And it's also possible to approach creditors to propose a permanent variation to the IVA, if the payment break or reduction isn't enough to keep the IVA on track.
But when payments into the IVA cease and all avenues have been explored with no resolution being found, the IVA will fail. At this point the IVA no longer exists, all protection that the IVA provided is withdrawn and creditors are now free to pursue the debts as they were before. Furthermore, the debtor once again becomes liable for the outstanding balances on the original debts.
In some cases, the IP will have specific instructions from the creditors as to what action they are required to take should the IVA fail. Along with the letter of termination, you will also be provided with a failure report of your IVA by your insolvency practitioner.
The failure report is a crucial document which you can utilise to plan your next step for addressing your debts.
The failure report will include details about your remaining debts, your creditors as well as how much debt you owe to each creditor. Depending on your financial circumstances and by assessing the failure report, you can start looking at other options to take care of your remaining debt. Please note that your IVA will also be marked as failed in your credit file and it will stay within your credit file for six years from the date on which it was approved.
Thus, your creditors will now know that they are no longer bound by the restrictions placed on them due to your IVA.
As I mentioned earlier, once your IVA fails, your creditors will be free to take legal action against you. Time to Call Any Time Morning 9.
This example is for guidance purposes only as IVA payments are based on affordability. To learn more read our terms and conditions. Suzanne Payne is licenced to act in the UK as an Insolvency Practitioner by the Insolvency Practitioners Association and she is bound by the insolvency code of ethics in carrying out all professional work relating to an insolvency appointment.
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