Are you struggling with your IVA? If you think you are in the wrong solution you could stop your IVA and go Bankrupt.
Jump to article contents:
- Can you stop an IVA?
- The implications of going bankrupt
- What if you are a home owner
- What happens to the money you paid into your IVA?
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Can you stop an IVA once it has started?
There may be a number of reasons why you decide to stop your IVA and go bankrupt. Your circumstances may have changed and you are now struggling to make your payments. Alternatively you may simply feel that it is not the best solution for you.
Although it is a legally binding agreement you can stop the Arrangement at any time if you want. All you have to do is stop making the monthly payments. You can do this be cancelling the standing order or payment authority to your IVA company.
Once you are three months in arrears and in the abscence of any other agreement with the company they will fail the Arrangement. You will be issued with a written termination notice.
If you are struggling with your payments talk to your IVA company. It may be possible to reduce them or take a payment break if the problem is only temporary.
What are the implications of going Bankrupt?
After your IVA has failed you can then go bankrupt if you wish. If you have no disposable income you will not have to make any further payments towards your debts.
If you have disposable income you will still have to pay this towards your debts for three years. As such if you have less than 3 years of your IVA left it may be better to stick with it unless you simply cannot afford to do so.
You can keep your car if you go Bankrupt as long as it is worth £1000 or less. If it is worth more you may have to sell it and get a cheaper one.
Before stopping your IVA speak to us about how bankruptcy will affect you. It is important to understand all the implications before making your decision.
What if you are a Home Owner?
If you own a property you may be worried about what will happen to it if you stop your IVA and go bankrupt. In fact your property may not be at risk. However it is very important to understand whether it will be or not.
Where there is little or no equity in your home it is unlikely to be at risk. The Official Receiver (OR) will not be interested in selling it if there is no financial benefit in doing so.
However if there is equity this is likely to be more of an issue. The OR will need to release this value in some way. In this situation sticking with your IVA may be the best option if possible.
If you have no equity in your property it may not be at risk if you go bankrupt. However you MUST get advice from us before making a decision to stop your IVA.
What happens to the money already paid into your IVA?
If you stop your IVA the money you have already paid in will not be returned to you. What happens to it will depend on how much you were paying and how long you were in the Arrangement.
Your IVA company is allowed to use any money you have paid to settle any fees and costs they have already incurred. After this any money left over will be paid to your creditors.
For this reason if you were paying £100 a month or less and have only been in the Arrangement for a year or two most if not all of the money paid in is likely to be taken in fees. Your original debt will not have reduced at all.
If you stop your IVA you remain liable for the original debt that you owed before the Arrangement started less any money that has been paid to your creditors.