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’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?
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.
Hello,
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.
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).
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?
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.