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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Hi i have cancelled my IVA today amd notified the company . I have paid off some of my debts in full and my 2 remaining ones i have asked for a payment plan . After i rang the company and sent them an email about cancelling my IVA i was told my creditors could make me bankrupt . How true is this has my 2 outstanding loans only total 4000
Hi Lesley
If you only owe £4000 these creditors can’t make you bankrupt. A creditor can only petition for your bankruptcy if they are individually owed £5000 or more. As such you have nothing to worry about. I am not sure why your IVA company would say that as it is totally incorrect.
So I had an original debt of just over £24,000.
I agreed an IVA back in 2017, but my situation has changed for the better, to the point where I am now expected to pay back a total of £27,000. £3,000 more than my original debt.
My IVA is scheduled to finish in March 2022. Would it be better to cancel it now and pay to creditors separately? There are three separate creditors, so I’m assuming it would become three separate payments.
When I first agreed the IVA, it was agreed that, on my income at the time, I’d only pay back around half if my debt (£12,000). I’ve already played over £13,000!
Now at £735 a month until 2022, knowing it takes me £3,000 over what I originally owed in debt, I’m wondering whether it’s worth cancelling and paying the creditors without a middle man.
Please advise if this is the best option?
Hi Richard
The situation you find yourself in is rare but certainly possible. Because payments in an IVA can increase if your income improves, it is possible to get in a position where your payments increase so much that you will repay more than the original debt owed. This is because in this situation, the IVA company can also charge fees and interest on the original debt.
Given this you are allowed to cancel your IVA and then pay off your debts yourself if you wish. The only thing you need to bear in mind when deciding to do this is how much of the money you have already paid into your IVA has gone off your debts and how much has been taken by the IVA company in fees. If you have already paid over £13,000 not all of this will have gone off your debt.
Clearly if you cancel your IVA you will still have to pay back the amount outstanding to your debts. So it is wort finding out what these figures are before making a a final decision.
Can I cancel an iva before the creditor meeting?
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.