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

  1. Steven says:

    Can I cancel an iva before the creditor meeting?

    1. Hi Steven

      The answer is absolutely yes. If the creditor’s meeting has not yet taken place you can instruct your IVA company to cancel the process. If you have had second thoughts and believe a different solution would be better for you then there should be no problem doing this.

      By the way, if the creditor’s meeting has already taken place and the IVA has officially begun you can still cancel if you wish. You simply cancel your payment instruction and tell the IVA company you no longer want to be in the agreement. They can then terminate it.

  2. Asia says:

    Hi James,

    I was wondering if it is possible to rebuild my credit if I cancel my Iva and pay my debts back on my own. Or is my credit doomed for the next 5 years ?

    1. Hi Asia

      Unfortunately, your credit rating is going to be pretty much poor until the record comes off your credit file. The record remains on your credit file for the total 6 years from the start date regardless of whether you stop the arrangement early and do something else or carry on paying it as agreed. The record itself can’t be amended and this is what makes your credit rating poor.

      As such stopping your IVA and then trying to repay your creditors yourself will not give you any advantage credit rating wise I am afraid. If your credit rating is the only consideration, I would advise that you stay in your IVA.

  3. Sarah says:

    Hi James,

    I am only in the first month of an IVA ( 2 payments made but 1 month since the creditors meeting) and have received a large drop in income. IP has said that if we ask for a payment reduction it is likely to increase the term of the arrangement by a minimum of 12 months. I am annoyed because although I was not aware of the impending income reduction during the initial calls to arrange the iva, I did inform them on the day of the creditors meeting.

    Had I have postponed the income/expenditure for a few weeks the initial proposal would have been correct and although I am aware it would not have been guaranteed to be accepted, if it had been I would have paid much less over a shorter term! My question is, if creditors ask for an extension, considering this is very early days, would I be better to fail the iva and try again with a different company and the correct income?

    1. Hi Sarah

      This is an unfortunate situation. If you informed your IVA company on the day of the creditors meeting, I am very surprised that they did not put the breaks on. They could have adjourned or cancelled the meeting and then re-issued the proposal with new figures relatively easily.

      If you have only made 2 payments into your IVA then I would say it would be sensible to cancel and start again. This will not be much of a problem as long as you are not a home owner (if you are you should call us for more advice before doing anything). If you decide to do this you need to stop your payments and tell the current company to terminate the agreement. You will then need to re-apply with a different company. We could help you with this so please do get in touch if you would like assistance.

  4. Carrina says:

    Hello, i had signed the proposal for a joint IVA in June and the meeting took place end of July. 2 weekly payments have already been taken but since receiving the new proposals from the creditors meeting and seeing it all in writing and the changes made, I’m not happy. Am I able to cancel as I haven’t signed and returned my copy to say I agree with the proposal or is it a done deal with the date stated in the proposal already passing?

    They took the first payment the day after the meeting and with work and moving house, ive only just got round to reading it all fully from the creditors meeting and would really like to avoid the IVA if possible. Thank you for any assistance

    1. Hi Carrina

      If your creditors required changes (known as modifications) to your IVA proposal before accepting it, you must give your specific agreement to these before the IVA can go ahead. The IVA company should not simply accept these on your behalf. If you believe you have not have the opportunity to reject the changes then you should certainly bring this up with your IVA company.

      Ultimately if your IVA company is unhelpful you can always just cancel your IVA if you like. As highlighted in the article above, you simply instruct your bank to stop any further payments being taken by your IVA company. You then tell them to terminate the agreement. They can’t stop you from doing this (although any payments you have already made to them will be lost). You can then use a different debt solution.

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