It is possible to stop and IVA if you are unhappy with the Arrangement. But you need to be aware of the implications.
Included in this article:
- How to stop your IVA
- What happens to the payments you have already made?
- Implications if you are a home owner
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How to stop your IVA
You can stop your IVA after it has started if you wish. The agreement is legally binding on your creditors and they are not allowed to break it. However you can.
You might want to do this if you believe you picked the wrong debt solution. Alternatively, you may be no longer happy with your IVA company.
Whatever the reason, if you decide 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. Then, you need to inform your IVA Company. They may try to talk you out of your decision but ultimately they cannot stop you.
It will normally take between 3-6 months for your IVA to fail. You will then receive a letter from your IVA company confirming that the Arrangement has been terminated.
Struggling to get your head round all of this? We can help. Call us (0800 077 6180) or complete the form below. The advice is free and confidential.
What happens to the payments you have 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.
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.
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I’ve been in my Iva for about 14 months and I pay 100 a month. I don’t owe that much debt it’s about 8,000 but I want to cancel my Iva and contact my creditors and pay this privately due to a change in circumstances. I can’t live with the restrictions of the Iva and it’s causing me a lot of stress.
If I send them an email to cancel how long will it take for them to cancel? What happens if they said I can’t cancel and I stop making my payments? Will it go to court? I don’t want to find myself in trouble due to me signing a contract? My family have offered to pay my debts and I no longer need the Iva. Is it likely they will refuse my request to cancel? And if they do how do I get them to release me?
Hi Adel
If you have decided that your IVA is no longer right for you, you can certainly cancel it and manage your debts using a different solution.
The process of cancelling is relatively easy. As highlighted in the above article you first cancel the payments (stop the direct debit or continuous payment authority from your bank). Then you simply call / email the IVA company. Tell them you no longer want to be in the IVA. Confirm that you have cancelled the payment and you want them to terminate it.
They cannot stop you cancelling if you want to. You will not go to Court and you will not owe your IVA company anything. Normally they will formally terminate the Arrangement 3 months from the date you last made a payment. They will write you a letter to confirm this. Once you receive this letter you can then contact the creditors yourself and make your own arrangements to pay them.
The only thing to remember is that it is likely that all the money you have paid into the Arrangement so far (£1400) will be taken by the IVA company in fees. As such you will still owe the same amount as when the Arrangement started.
Hi
I have had my IVA for just over a year now. paying in £100 a month.
My gross earning for the year have massively increased so my ‘extra money’ that i need to pay into the IVA has gone up alot.
If i was to just fail on my IVA. would that just stop? and i have to directly sort my debts out myself?
Would i get taken to court over failing my IVA?
Hi Benjamin
If you were to stop paying your IVA and let it fail it would simply stop. You could then deal with your creditors directly. Your IVA company would not take any further action against you and would not take you to court. Many people do this if they decide their IVA is no longer right for them for whatever reason.
Remember the £1200 or so that you have already paid into your IVA will be lost. The IVA company can quite legitimately take that to pay for the costs they have incurred setting up and running your IVA so far.
The only time this is not true is if one of your creditors (eg HMRC) have stipulated that if your IVA fails you must be forced into Bankruptcy. In that case if you stopped the Arrangement your IVA company would have no choice but to make you bankrupt.
I’ve cancelled my iva. But have not had any reply from my iva people. It’s been 6 months what do I do
Hi Peter
Some IVA companies do take longer than others to cancel an IVA. I have heard of some taking up to 8 months. I suggest you contact your old IVA company and find out what is happening. They should sent you out a letter confirming that they have terminated the Arrangement. You need to ask if this letter has been produced and if not when you can expect it.