Missing Contribution Payments into IVA and Breach Procedures:

When a client proposes an Individual Voluntary Arrangement (IVA), that normally allows an Adviser to close off their case file, but there is a further 60-72months for the client with unpredicted changes.

It is important that we do not allow clients to miss payments outside the approved conditions. This creates additional stress for the client and more work for the Insolvency Practitioner staff acting as the Supervisor on the case. However, this is not always easy to manage if communication breaks down, which could lead to an IVA failing. 

It is important to check which version of the Standard Conditions for IVA applies to the client case, e.g. the year in which the client’s IVA was approved will indicate which version is relevant to the case - these general terms and conditions have been amended slightly over the years. It is important to remember that discretion can also be used to assist the client.

If a client is in arrears: 

If there are more than three months’ arrears without any client contact, a Notice of Breach will be issued. However, in some conditions, if the client makes contact on receipt of the Notice of Breach letter the term of the IVA can be extended by up to 12 months to arrange a revised payment plan. This power survives expiration of the original term. 

In the 2008, 2012 and 2013 Standard Conditions for Individual Voluntary Arrangements state:

‘If the client makes contact the term of the IVA can be extended by up to 9 months to arrange a payment plan. This requires notices of extension to be prepared and sent in accordance with the terms of the IVA. (This is one for 6 months and one for 3 months to be completed and sent at the time the extension is agreed which must be at least 7 days before the IVA expires).’

2016 standard conditions state:

‘If the client makes contact the term of the IVA can be extended by up to 12 months to arrange a payment plan. This requires notices of extension to be prepared and sent in accordance with the terms of the IVA. (This is to be completed at the time the extension is agreed which must be at least 7 days before the IVA expires and sent to creditors with the next report).’ 

If the client defaults on the new agreed payment plan, the original notice of breach will still stand. The client will be sent a Notice of Default letter to get back on track with seven days to respond.

If the arrears are more than 9 (or 12) months in total, this will require a variation. In this case they must make three payments (at a reduced rate to be agreed at the variation meeting if necessary) to show their commitment to the IVA. This only applies to clients in arrears and not those who require a variation under other circumstances. However, if waiting on the client to make three payments at the reduced rate will result in the case being “strongmastered” – (Strongmaster v Kaye is current caselaw that set a precedence, to say where an IVA has expired by effluxion of time and has come to an end and cannot be revived as it is simply out of time) https://swarb.co.uk/strongmaster-v-kaye-chd-2002

The Supervisor can rely on discretion and this can be disregarded if they are convinced it is best interest of client and creditor, the variation can be progressed as soon as possible.
If a client is aware there are going to be a change in circumstances, it is always advisable to speak to their Supervisor as soon as problems arise. A payment break could be agreed up front and is always best option for a client for short term change in circumstances. A Supervisor will not give retrospective payment breaks. A detailed file note has to be prepared setting out the reasons. The distinction is important in the way the IVA moves forward, because if the client is simply in arrears and has already been issued with a Notice of Breach, then missing one payment could result in the IVA being terminated. Where a payment break has been agreed, the client is not in breach of the terms of their IVA, so missing future payments would mean that the breach process starts from there.

Best guidance is always to communicate and prepare an updated income and expenditure sheet – client portals are most effective for sharing information, they are secure and operates outside normal office hours and leave evidence of contact.

If you have a complex query or would like further support on money and debt issues the contact the Specialist Support service, which is available by phone 028 9064 5919 or email specialistsupport@adviceni.net. The service is available Monday, Tuesday, Wednesday 10am – 4pm and Thursday and Friday 8.30am – 3pm.