Can you stop an IVA if you are Unhappy?

How to Stop IVA if Unhappy There may be various reasons why you want to stop an IVA. It is possible to do so if you wish but you need to be aware of the implications.

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Why would you want to stop an IVA?

There are a number of reasons why you might want to stop your IVA. You may simply feel you picked the wrong debt solution. Having had time to reflect perhaps you believe an alternative might be more suitable.

It is possible that your circumstances have changed. Perhaps your IVA company has asked you to increase your monthly payments and you feel you are unable to afford this. Alternatively your situation may have become worse and you are no longer able to maintain your payments.

Whatever the reason you can stop your IVA if you wish. The agreement is legally binding on your creditors and they are not allowed to break it. However you can.

Although an IVA is a legally binding agreement you can decide to stop paying and use a different debt solution if you wish.

Stopping your IVA if you are a Home Owner

You may have heard that if you stop paying your IVA and allow it to fail your creditors will make you bankrupt. In fact even if there is considerable equity in your property it is very unlikely they would take this action.

The reason is they would lose control of the collection process and are unlikely to recover what they are owed.

As such if you stop the Arrangement they are much more likely to simply reinstate traditional debt collection activities against you. These could include employing debt collectors or applying for a CCJ.

If one of your creditors is HMRC they are likely to try and make you bankrupt if your IVA fails. Do not allow your Arrangement to fail without getting advice if you owe money to HMRC.

What Happens to any IVA Payments you already made?

When you stop an IVA much of the debt you had at the start is likely to remain outstanding. This is because your IVA company is allowed to deduct their fees and costs from the payments you have already made.

If the payments you have been making each month are only £100/mth or less it is very likely that all of the money will be taken in fees. Your original debt will only have reduced if your payments were much larger.

Given this you will need to put a new plan in place for dealing with your debt. Depending on your circumstances you might consider starting a new IVA. Alternatively if you are not a property owner or have no equity in your home going bankruptcy could be the fastest way to become debt free.

If your IVA fails you are still liable for all your outstanding debt. You must therefore have a plan in place to for dealing with this moving forward.

How to stop an IVA once it has started

If you have decided to stop your IVA the process is relatively simple. The first thing you need to do is cancel the payment you are making into the Arrangement.

You will then need to inform your IVA Company. They may try to talk you out of your decision but ultimately they cannot stop you from letting your IVA fail. They will normally require you to put your request in writing.

Your Insolvency Practitioner will write to you giving formal confirmation your Arrangement has failed. After this your name will be taken off the Insolvency Register.

Your IVA Company usually cannot fail your IVA until your payments are 3 months in arrears. As such if you are up to date you will have to wait up to 3 months for the failure to take place.

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6 thoughts on “Can you stop an IVA if you are Unhappy?

  1. Sheff says:

    Hi

    I am thinking about stopping to pay my IVA. I’ve recently had a pay rise so feel if they were to increase my payments I would be paying more in than I intially owed when I went into it. Can they make me pay in more than I owed?

    Can I stop it and repay my debts without there help? If so can the Iva company charge me if I fail it?

    1. Hi Sheff

      Your situation is not uncommon. It is possible to get a pay rise during an IVA. The resulting increase in your monthly payment can then mean you would pay back more than you originally owed (if you continue to pay all the outstanding payments).

      Your IVA company are within their rights to ask you to do this. The terms of your IVA will state that if your circumstances improve during the Arrangement you are liable to pay the full amount of debt that you originally owed plus the IVA company’s fees plus interest on the the origianl debt at the rate of 8% per year (from the start date of the Arrangement). This can mean you end up paying back thousands more than you originally owed.

      If you are facing this situation you can certainly let your IVA fail and then negotiate a payment plan directly with your creditors. If you do this your IVA company cannot charge you any more. However remember all (or a substantial amount) of the money you have already paid into the Arrangement will be taken by your IVA company to cover fees they have already incured. As such you may still owe most if not all the debt you owed when you started your IVA.

  2. Janet Leighs says:

    Hi I have been with Knightsbridge Debt Solutions with my IVA for over 3 years and they sold the debt to Creditfix. They have not adhered to my wishes and have put my payments up by £28 I have offered £90 per four months.

    They keep sending the emails to my partner who I have said will not deal with them and they must deal directly with me and me only as it is my benefits which pay this debt. They have not sent me details of why the money has gone up and what findings they have.

    I would love to change my IVA provider, if Knightsbridge can sell my debt to someone else why cannot I find a new provider? Hope you can assist as I find this company very poor and not customer savvy. Other things have happened saying our payment was not received 2 days after if left my account luckily I have a standing order with them so they cannot change the amount without me doing so.

    1. Hi Janet

      Sorry to hear about your experiance with Credit Fix. Unfortunately it is not possible to change your IVA provider. As such you have only two options. The first is to somehow find a way to continue working with Credit Fix. If this is not possible your only other is to let your current IVA fail.

      Once your current IVA has failed you are free to start a new one with a different provider if you wish or chose a different debt solution. However remember that it is likely that you will lose the money you have already paid into your current arrangement.

      Given this if are living in rented accommodation (or have no equity in your property) then many people who to fail their IVA then decide the best option for them is actually to go bankrupt. Although this sounds bad if you are not a home owner it is really no worse than being in an IVA. In addition if your only income is benefits then you would not have to make any further payments towards the debt and it would be written off after 12 months.

  3. Stuart Leyland says:

    I was also with Knightsbridge and was more than happy with the service. Until they sold to Creditfix. For my annual review they requested information in which they were able to access my online bank statements, was not happy about doing this but did it and the review was an increase of £18, again there was no information related back to me as to how they came to the conclusion of an increase like this. Yes it is affordable but nonetheless, how? Why? And what have they allowed for living expenses? I know there is a limit to what they accept as amounts for everyday bills and spending.

    Every year I receive a statement from my creditors and since I have started this IVA 3 years ago, none of the statement\creditors appear to have received any monies paid into my IVA, I find this confusing. Also, they seem to have stopped taking the payments as from August 2018, and I am writing this in November 2018. I have no real desire to contact them a such as they are supposed to be the professional body who know where they are up to with their clients. I am saving the money each month awaiting them to contact me but I cannot see that happening any time soon. Neither have I received any contact from any of my creditors, not that I really expect to do so as this how an IVA works.

    What can I do and what should my next step be?

    1. Hi Stuart

      It seems less than satisfactory that Credit Fix would increase your monthly payment without any explanation. I can understand your frustration at this. I believe you are perfectly within your rights to demand to see what figures have been used. After all this is ultimately your IVA and your information that they are then feeding to your creditors.

      In terms of the statements you receive from your creditors I would not worry about these too much. They may or may not record payments received from your IVA. In addition depending on the agreement Credit Fix may not actually have to distribute any money to the creditors on a monthly basis. It may be that they are allowed to do this annually or even in one lump sum at the end of the Arrangement.

      Important: If Credit Fix have not taken a payment from you since August this is very serious. You MUST contact them and highlight this immediately. If the payments are not being made than you are getting into arrears. You will have to make up these missed payments once Credit Fix become aware of them so you are doing the right thing by putting the money aside. However do not just let this run on. The last thing you want is your next letter from Credit Fix saying that they have failed your IVA because it has not been paid…..

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