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.
Jump to article content:
- Why stop your IVA?
- Stopping an IVA if you are a home owner
- What happens to the payments you already made?
- How to stop an IVA
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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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