Money Advice, Debt Advice & Debt Help
Can you stop your IVA if you are Unhappy?
Money Advice, Debt Advice & Debt Help

Can you stop your IVA if you are Unhappy?

Can you stop your IVA if you are 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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36 thoughts on “Can you stop your IVA if you are Unhappy?

  1. NIkki says:

    Hi, Please can you advise….if I cancel my IVA and discuss with creditors how will I know how much has been paid to which creditor? I have had a breakdown of receipts and payments and as far as I can see they have dumped all the funds into an HSBC holding account after taking their fees. (There is around 5k in there) will this money be lost or has it actually been distributed or will it be distributed on the cancelling of the IVA? Any advice welcome.
    Thank you Nikki

    1. Hi Nikki

      After your IVA has been cancelled you should be able to get a schedule of what money has been paid to whom. If you believe that after fees there will be money left over to distribute to creditors then this is what will happen.

      Ultimately your IVA company will send you a report confirming the amount paid out to creditors. However they may not break down exactly who has been paid what. However the funds will have been distributed to creditors on a pro rata basis (ie each will get a percentage of the funds available based on the percentage of the total debt they are owed). As such you should be able to work out pretty accurately how much each has received.

      That said when you start negotiating payment plans with each they will confirm the outstanding balances to you.

  2. Jane says:

    I have just cancelled my iva. How long does it take before I hear from them? I am supposed to pay £234 a month and it a lot as I’m zero contracted hours

    1. Hi Jane

      If you have cancelled your IVA payment you will normally hear from your IVA company once the next scheduled payment is missed. Having said that some companies can take longer as they are not so “on the ball”.

      If you want them to cancel the arrangement then I suggest you contact them directly yourself and confirm that is what you want.

      Have you considered how you will manage your debts moving forward? Please contact us if you need further help or advice.

  3. Ian says:

    I entered an IVA with CreditFix back in Dec 2015. I then wanted to cancel the plan so I stopped paying. Infact I didn’t make one single payment. In due course my IVA was failed and the letter of termination was sent out. I then completely put this to the back of my mind.

    Now Aug 2019 I’m selling my house and a restriction has popped up. It’s the restriction that CreditFix placed on my property when I entered the IVA back in 2015. They are demanding that I pay the £8100 owed to my creditors and the £4100 in fees for their service before they remove the restriction. So they have me over a barrel, because they know I need that restriction lifted in order for my house sale to go ahead.

    What I don’t understand is are they allowed to keep that restriction filed with the land registry even though the IVA failed. I have even offered them their £4100 in fees to lift the restriction and then to let me contact my creditors to make my own arrangements, but they are not excepting this are are demanding the full £12200 to release the restriction. How can this be?

    I’ve also noted that every signature on the contract is not in fact my signature and is a screen written name that the CreditFix rep filled out himself. Does this mean I can fight this on the fact that I didn’t sign the original contract?

    One last thing, am I with in my rights to go to my creditors and offer them final settlement figures to reduce the £8100 that CreditFix are insisting I pay?

    1. Hi Ian

      This is an extraordinary situation. I do not believe that Creditfix are within their rights to make you pay more money to them in return for lifting the restriction they put on your property. When your IVA was terminated Creditfix relinquished their authority to act as your supervisor. They should have lifted their restriction from your property at that time. They only have legal power to issue and hold a restriction while they are your supervisor.

      I believe they should lift this restriction immediately. If they do not you have grounds to make a complaint to the insolvency service. I understand there have been other insolvency practitioners in the past who have been fined by the insolvency service for not releasing restrictions under these circumstances.

      You should demand that they lift their restriction with no further conditions within 7 days or you will escalate a complaint. If they do not you need to use the Insolvency Service complaints escalation process.

      In terms of your outstanding debt, yes you are perfectly within your rights to go direct to them now and negotiate final settlements with them.

  4. brian says:

    Will I be made bankrupt if I cancelled my iva

    1. Hi Brian

      Normally you will not be made bankrupt if you cancel your IVA. Despite what you may have heard the IVA company will not automatically make you bankrupt. They will simply write to you and your creditors confirming that the arrangement has been terminated and they are no longer responsible for assisting with the collection of your debt.

      Generally speaking your creditors will start collection actions against you again within 2-3 months of getting your termination letter. Given this you should have a plan in place for how you will manage your debts moving forward (perhaps with another IVA or a debt management plan).

      The only time you are at risk of bankruptcy is if there has been a specific clause written into your IVA stating that if it fails you have to be made bankrupt. This would be very unusual unless one of your largest creditors is HMRC.

  5. Patrick says:

    Hi currently in iva paying 164 a month council tax included first year owe about six thousand own nothing wanted to change for DRO as struggling to live on what iam left each month left with 270 a month but got to get food clothers ect what left after Bill’s do I qulify for DRO only few months in iva

    1. Hi Patrick

      The qualification criteria for a DRO (Debt Relief Order) are as follows. Your total debt must be less than £20k, your cannot be a home owner, your car if you have one must be worth less than £1000 and your surplus income (after ongoing council tax payments are taken into account) must be less than £50/mth. If you believe you meet these then yes you can stop your IVA and start a DRO. It does not matter that you have only paid the IVA for a few months.

      If you decide to go ahead you must first fail your IVA. To do this you should stop making the payments and tell your IVA company that you want them to fail the Arrangement. You can only start your DRO application after you have received a letter from them confirming that the Arrangement has failed. You will then need to contact an approved intermediary for assistance as you cannot apply for a DRO yourself.

  6. Mike says:

    I’m struggling to pay my Iva it was £265 but after a review they want another £33 I need to get out of it. I’ve been in it 4 years how much longer will I be in and can I just stop?

    1. Hi Mike

      It is possible to stop an IVA and manage your debt another way. However given you have already been in the arrangement for 4 years you need to think very carefully. If you stop the arrangement a chunk of the money you have paid in will be taken in fees by your IVA company. As such you are still likely to have a significant debt outstanding which will still have to be paid.

      The standard length of an IVA is 5 years although some last for 6 (you need to check this with your IVA company). If yours is a 5 year plan you only have another 12 months to go. As such this extra £33/mth equals a total of £396 over the year. Is it really worth stopping your IVA and still owing a considerable sum for this? In the absence of any other information about your situation my recommendation would be to stick with it.

      If you really cannot afford the extra £33 you can always go back to your company and ask them to review the figures again.

  7. Josh says:

    I have just started an IVA based on PAYE earnings I also do a little self employed work which was not put into IVA as advisor at Stepchange said credit fix would only do it based on my PAYE.

    I have been trying to get an answer to how I need to make extra payments due to my self employed work and also get clarification that it’s ok for me to pay my own self assessment bills through my bank account as HMRC are not listed as a creditor.

    I cannot get a straight answer from them after almost 3 weeks. I am worried that by not having clarification that everything I am doing is correct that my IVA will eventually fail.

    If the worst comes to the worst would I still be able to get a DMP after a failed IVA? I am beginning to wonder after all of this stress if it wouldn’t have been better in the first place.

    1. Hi Josh

      It is certainly OK to work on a self employed basis while you are in an IVA. However you need to be careful to correctly calculate the amount you actually put in your pocket. This would be the amount you earn less any business expenses and the necessary provision for tax. You are allowed to put aside the tax so you can pay this when it becomes due.

      Credit Fix will certainly be interested in the end figure you put in your pocket. If you earn it regularly each month they may need to use an average figure and recalculate your income and expenses budget to reflect the increase in your overall income. If it is only now and then they will probably treat it as any other overtime or bonus payments.

      Ultimately if you feel you cannot agree a satisfactory way forward with Credit Fix you have two options. You could cancel your IVA with them and start a new one with an IVA company which is more experienced in working with people who have self employed income. Alternatively there is absolutely no reason you should not fail it and then use a different solution such as a DMP.

      Please do not hesitate to contact me if you would like to discuss these options in more detail (0800 077 6180).

  8. Louise says:

    Hi, I have been in my IVA with payplan plus since may 2012. My circumstances have changed a lot over this time so have had payment breaks an missed payment extensions. When I signed up to the IVA it would of been a total of £10,200 payable over 5 years. In the 7 an half years since I started I have paid £9,400.

    I currently would be looking at another year or just over with all the extension to clear. I want out now as it’s dragged on so.long. what would happen if I just let it fail?

    1. Hi Louise

      You could cancel your IVA now if you wish. However you would be throwing away all the hard work you have done over the last 7 years. If you were to cancel a large portion of your debt will remain outstanding.

      PayPlan will take a significant portion of the £9400 you have paid in to cover their fees and costs which will certainly run into the thousands. You would then probably have to spend more than 12 months paying off the remaining balances to your creditors which would still be owed.

      Given this my best advise to you is to stick with your IVA for the final year if you possibly can. However I would speak to PayPlan and confirm with them the exact number of months you have left to pay.

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