Stop your IVA and go Bankrupt

Stop your IVA and go Bankrupt

Are you struggling with your IVA? If you think you are in the wrong solution you could stop your IVA and go Bankrupt.

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Want help to stop your IVA and go Bankrupt? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

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.

Thinking about stopping your IVA? Want to know if bankruptcy is the right option for you? Contact us to discuss your options (0800 077 6180).

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10 thoughts on “Stop your IVA and go Bankrupt

  1. Kristian says:

    Hi I’m currently in an iva. For nearly 3 years with a years extension. I can’t afford to continue paying the iva. Now if i file for bankruptcy how much upfront costs am I looking at? Also i have a car which is a necessity i have 4 children in 4 different schools and use the car to go to work. The car is on finance. Will i be able to keep the finance going? I privately rent my home. Will a bankruptcy effect my tenancy?

    1. Hi Kristian

      If you can no longer afford to pay your IVA then then allowing it to fail and going bankrupt can often be a sensible option. The cost of bankruptcy is £680. This can be paid in instalments but you cannot submit your application until it is paid in full.

      Whether or not you will be able to keep your car will depend on a number of factors. The first is the attitude of the finance company. You need to contact them and ask whether it would be an issue if you went bankrupt (given of course that you maintain the finance payments). If they are OK then you need to consider the attitude of the Official Receiver. Generally they will be happy for you to continue with the payments as long as they are not excessive. Also the net value of the car (second hand value less outstanding finance) must be less than £1000.

      In terms of your rental property this will not be affected. You continue to pay the rent as normal. The landlord will not be told unless you are in arrears.

  2. Lucy Sonlle says:

    Hi I’m currently in an Iva only 6 months in and my husbands job is relocating abroad, looking at the exchange rate and sending money back to cover the IVA is not going to be a good option for us. Also I will not be able to work to begin with in a new country. Can I apply for bankruptcy on these grounds and how will it effect me getting a job abroad? Many thanks

    1. Hi Lucy

      Given you are not a home owner then based on what you have said stopping your IVA and going bankrupt would be a sensible solution for you. I have worked with a number of people in the same situation who have done just that. You could definitely do so.

      Generally speaking the easiest thing to do is stop paying your IVA and go bankrupt before moving (you have to do this if you are moving elsewhere in Europe).

      The fact that you are bankrupt will have no affect on you in the new country. Your local credit rating will not be affected and there would be no reason you should not get a job.

      The only thing to remember is if you did get a job within the year you are bankrupt you still have to inform the Official Receiver. If as a result you then have some surplus income you may have to start making payments towards your UK debts. Such payments would then last 3 years. As such it is sometimes best to start with a low paid job or not get a new job at all until after your bankruptcy is over (it lasts 12 months).

  3. Ben says:

    I am currently in a good stable job earning 50k a year before tax.
    i want to stop my iva and continue to pay my debts off on my own as it would be easy and i wouldnt have to pay so much into my iva.

    Do you always have to go bankrupt after a IVA?
    How do you know if a debtor would file for bankruptcy if i failed my IVA?

    If i was to go bankrupt. how much of my disposable income has to be paid towards my bankruptcy? and what is classed as disposable income?

    1. Hi Ben

      If you stop your IVA you do not have to go bankrupt. You can chose how to manage your debts from then on. So if you want to pay them directly that is your choice.

      Generally speaking if you allow your IVA to fail your creditors are very unlikely to make you bankrupt. This is because nine times out of ten when you go bankrupt they will get little or none of their money back.

      Note: The above statement is correct in 99% of cases. In some rare cases one of the creditors in your IVA might stipulate that if the arrangement fails then you must be forced to go bankrupt. Normally HMRC are the only creditor who make this demand.

      Disposable income is the amount left over after your reasonable living expenses are deducted from your income. If you go bankrupt whether or not you have to make ongoing payments towards your debts will depend on how much disposable income you have. If you have none then you will not have to make further payments (unless your situation improves during the year). If you do then 100% of this will have to be paid towards your debts for 3 years.

  4. Karl says:

    Hello

    If I stop my iva and go bankrupt will the iva be removed from my credit file

    1. Hi Karl

      The answer is no. The record of your IVA will remain on your credit file for 6 years from the date it started (whether you stop it early or complete it as agreed). However this will not really cause you any issues. The record of you going bankrupt will also be added to your file and remain there for 6 years. Your credit rating will not really be made any worse by this.

      Basically the effect of and IVA or bankruptcy on your file is the same. So by the time the bankruptcy record comes off your file the IVA record will also be gone. Your credit file will then be clear again.

  5. Darren says:

    Hi i have been in an iva for 2 years now & i have just had a couple of debts land on me from 2013 … a couple of questions id like to ask.

    As i cant afford to pay these debts and think it best to go bankrupt. i would like to know 1. I am a registered keeper of a vehicle worth about 4000 pound but i do not own the car i am paying my father back on a monthly basis which he has a payment book i pay £20 per month and have paid around £460 SO far. So the question is what happens here.

    And 2nd is it best for me to go bankrupt. The debts i am talking about are to the value of £3600 & with my iva & also attachment to my wages of 70 per month i simply cant afford it

    1. Hi Darren

      From what you have said stopping your IVA and going bankrupt might well make sense.

      All the debt you owe would be included in the bankruptcy (both the debts currently in the IVA and the new debts that you have just been made aware of). In addition the attachment of earnings against your wages would be cancelled (the debt you are paying which is associated with that would also be included in the BK). As such your take home pay would go up by £70/mth.

      Remember if you do have a surplus income you would still have to pay that towards your debts for 3 years.

      In terms of the car you would need to say on your application that it is owned by your Father. The fact that it is registered to you and you pay for the running costs is not an issue. You are simply loaning the car from him. My suggestion would be that you do not highlight that you are paying him for it in your living expenses as that would complicate the situation. However given it is £20/mth you should not have an issue maintaining this payment from your other allowable expenses.

      If you want to discuss this further please don’t hesitate to contact me (0800 077 6180).

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