What Happens to My IVA If I Lose My Job? Steps to Take and Options Available
Published 23rd of September 2016·Updated 23 April 2026
Reviewed by: Reviewed for accuracy April 2026
Losing your job during an IVA does not automatically end the arrangement. Your insolvency practitioner (IP) can grant you a payment break of up to three months without needing creditor approval. If your job loss is longer term, your monthly payments can be reduced, but creditors must agree to any permanent change. Acting quickly and keeping your IP informed gives you the best chance of keeping your IVA intact.
Short Summary
Contact your IP on the same day you find out you are losing your job. Do not wait until you miss a payment.
Your IP can authorise a payment break of up to three months under the standard IVA protocol. No creditor vote is needed for this.
If your income does not recover, your IP can propose a variation to reduce your monthly payments, but creditors holding 75 per cent of the debt by value must agree.
If the IVA fails because you cannot resume payments, your creditors can pursue you for the full original debt minus what you have already paid. Bankruptcy may become the only remaining option.
What should you do first when you lose your job?
Contact your IP as soon as possible. Call them the same day if you can. Your IP needs to know about any change in your circumstances under the terms of your IVA. Telling them early gives them the most options to help you; leaving it until a payment is missed narrows those options considerably.
Gather the evidence you will need: your redundancy letter or P45, any correspondence from your employer, and details of any redundancy pay or statutory redundancy payment you will receive. Your IP will ask for these.
Can you get a payment break on your IVA?
Yes. Under the IVA Protocol, which governs most IVAs in England and Wales, your IP can grant a payment break of up to three months on their own authority without consulting your creditors. This is designed precisely for situations like redundancy, illness, or unexpected financial shock.
During the break, no payments are required. Missed payments are typically added to the end of the IVA or dealt with as part of a review once your circumstances change. The break does not mean those months are written off.
What if your IVA started after 1 July 2012?
If your IVA started on or after 1 July 2012, you are covered by the IVA Protocol, which provides specific protections for changes in circumstances. These include the three-month payment break and a formal variation process if your income changes significantly. Providing evidence of your situation (such as your redundancy notice) is all that is usually required to trigger the break.
What happens if your income does not recover?
If you cannot find new work within the payment break period, your IP can propose a variation to the IVA. This means formally reducing your monthly payments to reflect your new lower income. The revised proposal must be approved by creditors holding at least 75 per cent of the debt by value. Most creditors will agree to a sensible reduction, because some payment is better than none.
If your income is unlikely to recover at all (for example, due to a long-term illness or disability), more fundamental changes may be needed. Your IP may propose a full and final settlement using a lump sum, if one is available, or may conclude that the IVA is no longer viable.
What if creditors reject the variation?
Creditors who reject the proposed variation must provide a reason. If no agreement can be reached and you cannot resume payments at the original level, the IVA may fail. When an IVA fails, your IP issues a certificate of termination. Your creditors can then pursue you individually for the balances remaining on their debts, minus payments already made.
At this point, bankruptcy may be the most realistic option. A free debt adviser at StepChange (0800 138 1111) or Citizens Advice can help you understand whether bankruptcy, a debt relief order, or another route is appropriate if your IVA fails.
How does redundancy pay affect your IVA?
Any redundancy payment you receive must be declared to your IP. Statutory redundancy pay and enhanced redundancy pay are treated differently under IVA terms; your IP will calculate how much, if any, must be paid into the IVA. Some IP firms allow you to retain up to one month's equivalent salary before requiring a contribution from redundancy pay. Check the specific terms of your IVA proposal for details.
Possible outcomes when you lose your job during an IVA
| Scenario | What typically happens |
|---|---|
| Job lost, back in work within 3 months | Payment break covers the gap; IVA continues unchanged |
| Job lost, new role found at similar income | Variation may not be needed; missed payments added to end |
| Job lost, new role at lower income | Formal variation proposed; creditors must approve reduced payments |
| Job lost, income unlikely to recover | Lump-sum settlement explored or IVA may fail |
| IVA fails | Creditors can pursue individually; bankruptcy may follow |
FAQ
Will my IVA automatically fail if I lose my job?
No. Losing your job triggers a review process, not automatic failure. Your IP has tools available, including payment breaks and formal variations, to try to keep the arrangement alive. The IVA will only fail if no workable solution can be agreed with creditors.
Do I have to tell my IP if I get a new job with higher pay?
Yes. Any increase in income must be disclosed at your annual review, and sometimes immediately if the increase is significant. A higher income may result in your monthly payments increasing, as the IVA requires you to pay what you can genuinely afford.
Can I claim benefits while on an IVA?
Yes. Universal Credit, Jobseeker's Allowance and other benefits are income, and your IP will factor them into your revised budget. Your IP will not penalise you for claiming the benefits you are entitled to. Many people on IVAs claim benefits at some point without the arrangement failing.
What happens to my redundancy lump sum if I have an IVA?
You must declare it to your IP. The amount you keep will depend on your IVA terms, but most IPs allow you to retain a proportion equivalent to around one month's income. The rest is likely to be paid into the IVA as a windfall contribution.
Can I restart an IVA after it has failed?
Not easily. Once an IVA fails, it cannot simply be restarted. You would need to propose a new IVA to your creditors from scratch, with your IP's assistance. Whether creditors would accept a new proposal depends on your circumstances at that time. A free debt adviser can assess whether a new IVA, a debt management plan, or bankruptcy is the most realistic path forward.