IVA's and unemployment
Back to "When an IVA is not right"
Unemployment can of course be a major cause of debt. Whatever insurance provision we may have made and however much we try to cut back, the loss of income from a job is usually devastating. Immediately on finding ourselves unemployed or soon to be unemployed we need to ensure we have made all necessary claims for entitlements and help. We need to contact our creditors to explain our circumstances.
Once back in employment we may need to assess the best way to manage any debts we have, and an IVA (= Individual Voluntary Arrangement) may be a very good solution. It will enable us to repay some or all of our debts but at an affordable rate and with a fixed end point at which time all remaining debt is written off.
Unemployment during an IVA
Once an IVA has been accepted it is of course in everyone's interests to see that the plan is successfully completed. No one should start an IVA knowing that it is unlikely to come to a satisfactory conclusion. However, no-one can predict what tomorrow will bring, let alone the length of an IVA (usually 5 yrs).
With unemployment running high, even the most stable job can be under threat. Sometimes those in an IVA are faced with redundancy which inevitably creates a great deal of financial uncertainty. Income maximisation is vital, and calling in any insurance policies, payment protection and housing benefit entitlements is vital.
When faced with unemployment and our inability to maintain IVA payments, it is important to notify our Insolvency Practitioner (or IVA firm) immediately. They will be understanding and reassuring. They will in all likelihood suggest a payment break from the IVA and creditors will be notified. How long this arrangement will last will vary according to circumstances, but enough time will be granted to try to find alternative employment.
Failed IVA's
There comes a point however that faced with long-term unemployment, or reduced income, that the IVA payments are no longer affordable (bear in mind that a reduced payment may be an option), and alternative solutions need to be found. Unfortunately the debt still remains. The most likely alternative will be either bankruptcy or making token payments of £1/mth to each creditor.
Lump sum redundancy
Some people are entitled to a lump sum settlement if they are made redundant. It may be that this is needed simply to live on faced with unemployment. However it is worth noting that creditors may be interested in a lump sum settlement and would consider such an offer so the whole debt is cleared. The offer presupposes that there is no longer any disposable income to afford monthly payments in an IVA. It may work for people who receive a lump sum and get a new job but on less pay, so they can't afford the monthly IVA payment any longer but can offer a settlement figure.
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