If you are currently struggling to pay your Individual Voluntary Arrangement (IVA) and believe it is the wrong solution what can you do? There are a number of things to consider but one option is to stop your IVA and go Bankrupt.
Why did you start your IVA in the first place?
When you were making your decision to start an IVA you may have thought that bankruptcy was to be avoided at all costs. The solution is often painted in a very negative light. It may not even have been discussed with you. Whether you got debt advice either from a fee charging debt company or a charity they probably talked to you about the advantages of either an IVA or a Debt Management Plan (DMP). However Bankruptcy may have been ignored altogether.
I come in contact with many people who tell me that this was true for them. A lady I spoke to recently was struggling with her IVA where she had agreed to pay £65/month. She was living in accommodation rented from the Council and had no assets. Her total debt was £17000. If she had gone bankrupt instead of starting the IVA the stress of paying her debt would have been taken away completely. It is also highly unlikely that she would have had to make any monthly payments. When I asked if this option had been discussed with her before she started her IVA the answer was no.
Of course there may be good reasons why you should chose an IVA or Debt Management Plan over Bankruptcy. In particular if you are a home owner with equity it might put your property at risk. There is also the upfront Court fee to think about. However it is certainly not correct to think that Bankruptcy should always be avoided. If the option is not even discussed with you then this is simply bad advice.
Is going Bankrupt all that bad?
Clearly if you are a home owner your property may be at risk if you go bankrupt. As such an IVA might well be the better solution for you. However I want to focus on non home owners here. If you are renting and have no assets then more often than not the affects of going Bankrupt will be no worse for you than starting an IVA or a Debt Management Plan. You may well be financially better off if you stop your IVA and go bankrupt.
Contrary to what you may think Bankruptcy is not advertised in your local newspaper. Your employer will not be told and it is unlikely your landlord will find out. It is true that your credit rating will be negatively affected for 6 years. However this is the same as if you started an IVA and very likely to be the same in a Debt Management Plan.
You can keep your car when you go Bankrupt as long as it is worth less than £1000. If your car is worth more than £1000 you may have to sell it and get a cheaper one. However you can still keep it if someone else pays the difference on your behalf.
Should you stop your IVA and go Bankrupt?
If you are in an IVA but are now are struggling to make your agreed payments or are unhappy for any other reason the first thing you should do is speak to your Insolvency Practitioner or case worker. If you explain the situation it might be possible for them to make changes to the Arrangement to make it more suitable. For example they might be able to get agreement for your payments to be reduced. However if they are unable to help and you want to stop your IVA and go bankrupt you can do so at any time.
All you have to do is simply stop making your monthly payments. Normally you will need to cancel your standing order to do this. You then need tell your Insolvency Practitioner that you want them to fail the Arrangement. They will issue you with a formal notice to confirm that it has been terminated.
You can then go bankrupt if you wish. You will usually have to make yourself bankrupt. The creditors you still owe money to will not want to pay for this themselves. Once you are bankrupt if you are unable to make any further payments towards your debt you do not have to do so. However it is important to understand that if you do have a surplus income you will still have to pay this towards your debt for three years. This is known as an Income Payment Agreement. For this reason if you have less than 3 years of your IVA left to pay it may be best to stick with the Arrangement unless you simply cannot afford to do so.