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.
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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 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?
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.
Will I be made bankrupt if I cancelled my iva
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.
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
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.