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Stop your IVA and go Bankrupt

Stop your IVA and go Bankrupt

Stop your IVA and go Bankrupt

Are you struggling with your IVA? If you think you are in the wrong solution you could stop your IVA and go Bankrupt.

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Want help to stop your IVA and go Bankrupt? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts

Can you stop an IVA once it has started?

There may be a number of reasons why you decide to stop your IVA and go bankrupt. Your circumstances may have changed and you are now struggling to make your payments. Alternatively you may simply feel that it is not the best solution for you.

Although it is a legally binding agreement you can stop the Arrangement at any time if you want. All you have to do is stop making the monthly payments. You can do this be cancelling the standing order or payment authority to your IVA company.

Once you are three months in arrears and in the abscence of any other agreement with the company they will fail the Arrangement. You will be issued with a written termination notice.

If you are struggling with your payments talk to your IVA company. It may be possible to reduce them or take a payment break if the problem is only temporary.

What are the implications of going Bankrupt?

After your IVA has failed you can then go bankrupt if you wish. If you have no disposable income you will not have to make any further payments towards your debts.

If you have disposable income you will still have to pay this towards your debts for three years. As such if you have less than 3 years of your IVA left it may be better to stick with it unless you simply cannot afford to do so.

You can keep your car if you go Bankrupt as long as it is worth £1000 or less. If it is worth more you may have to sell it and get a cheaper one.

Before stopping your IVA speak to us about how bankruptcy will affect you. It is important to understand all the implications before making your decision.

What if you are a Home Owner?

If you own a property you may be worried about what will happen to it if you stop your IVA and go bankrupt. In fact your property may not be at risk. However it is very important to understand whether it will be or not.

Where there is little or no equity in your home it is unlikely to be at risk. The Official Receiver (OR) will not be interested in selling it if there is no financial benefit in doing so.

However if there is equity this is likely to be more of an issue. The OR will need to release this value in some way. In this situation sticking with your IVA may be the best option if possible.

If you have no equity in your property it may not be at risk if you go bankrupt. However you MUST get advice from us before making a decision to stop your IVA.

What happens to the money already paid into your IVA?

If you stop your IVA the money you have already paid in will not be returned to you. What happens to it will depend on how much you were paying and how long you were in the Arrangement.

Your IVA company is allowed to use any money you have paid to settle any fees and costs they have already incurred. After this any money left over will be paid to your creditors.

For this reason if you were paying £100 a month or less and have only been in the Arrangement for a year or two most if not all of the money paid in is likely to be taken in fees. Your original debt will not have reduced at all.

Thinking about stopping your IVA? Want to know if bankruptcy is the right option for you? Contact us to discuss your options (0800 077 6180).

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    24 thoughts on “Stop your IVA and go Bankrupt

    1. steve says:

      Hello, Im in a bit of a tricky situation and needed some advice. I have a wife and child aged 7 and currently in a IVA 1 year in. I have 2 months left until i leave the Army which means i have to move from the Army house. I currently pay £500 a month for IVA but i know my next job i wouldn’t be able to pay this. By the time my rent deposit, house rent, and all living bills come out ill be lucky to have any money.

      Whilst i was in the IVA sometimes i got paid extra for being away from home and all went to the IVA which doesn’t reduce my debt. I’m due to get a lump some when i leave as part of early pension and this money would help us a few months but 50% is going to IVA and not reducing my debt which annoys me as i want to pay the debt.

      Anyway it has pushed me to think should i go bankrupt? and have a clean slate or are there other options as im thinking if i stay in my IVA im going to struggle to live. Will going bankrupt stop my security clearance? My debt is £37,500

      Hope this makes sense and hope you can help.

      1. Hi Steve

        If you feel that once you have left the army you will not be able to sustain your IVA payments then yes you certainly can consider terminating the arrangement and going bankrupt. That said I think you can consider a couple of different options:

        1 – Speak to your IVA company about using the lump sum you get from the Army to settle the whole IVA agreement early. Given you are not going to be able to keep paying the arrangement this is one time when this type of lump sum settlement should be possible. Clearly you will need to retain some of the money you receive to sustain your living expenses so it would not all be available and the IVA company should recognise this.

        2 – If your IVA company are unable / unwilling to reach an amicable arrangement to help you settle the IVA then yes you would be right to consider terminating the agreement and then the option of bankruptcy. If you go this way then you can terminate BEFORE you receive your lump sum from the army. As a result you would not have to hand over any of it to the IVA company. Yes this is breaking the terms of the IVA and they will threaten to fail it if you don’t pay up. However given you have decided to go bankrupt you want them to fail it anyway…..

        Then you can use the lump sum you have received to get yourself set up with a new rented property and start to look for work. Depending on how much you receive if you have anything left when you go bankrupt you would need to expect to have to hand this over to the official receiver. As such you would need to time the application right so it does not put you in an awkward position financially.

        In terms of your security clearance this should not be affected if you go bankrupt. I have worked with many people in the forces over the years who’s jobs have not been affected. However I cannot guarantee that it will not affect jobs you go for after you leave the army. That said this is normally only the case if you are required to have a clear credit history.

        If you want to discuss your options in more detail please do contact me and I would be happy to assist you (0800 077 6180).

    2. MR S says:

      Hi I am in my third year of my Iva , I currently pay £200 per month. I do however have debt that was not included in my Iva. I pay a further £200 to this so a goal of £400 per month I just can’t meet these payments anymore.

      I have 3 children and partner my surplus income with the Iva is £200 a month hence why I pay this to the Iva. I am considering bankruptcy to get these payments reduced will I still have to pay £200 per month to the bankruptcy for 3 years as it’s what the Iva views as my surplus income ?

      1. Hi Mrs S

        You seem to be in a crazy position. Clearly there is no way you can maintain your £200/mth IVA payment plus additional debt payments of another £200/mth. Have you spoken to your IVA company about this additional debt? One option might be to add it into the Arrangement. If the alternative is you terminating your IVA and going bankrupt your IVA company might well try to help.

        If the extra debt cannot be added or you cannot agree a way forward with your IVA company then stopping your IVA and going bankrupt would be a sensible option to consider (assuming you are not a home owner). Whether or not you would have to make ongoing monthly payments depends on whether you actually have any disposable income or not. The fact you have been paying £200/mth into your IVA is not relevant.

        The official receiver will take a revised view of your income and expenses budget. If in reality your disposable income is less than £200/mth your payments would reduce. If in fact you have no disposable income you would not have to make any ongoing payments at all.

    3. Lee says:

      Hi. I have been in an IVA since March 2019 and my wife has been in hers since September 2019.

      When we took out our IVAs, the budgets were reviewed by the IP and allowed for a payment of £76 per month for mine and £68 per month for my wife’s. We have never missed a payment.

      My wife earns a quarterly bonus which can vary from £30 to £900. However it’s never been anywhere near £900. I can earn commission which can vary from £200 to £700 per month. However the budgets could not include this as it wasn’t guaranteed income. That meant our budgets didn’t include money for school bus travel, school meals, emergency contingency, school trips, anything for gifts for birthday or Christmas for the kids etc etc. We don’t smoke or drink.

      My question is, where do I go with this please? My IP just keeps asking for more money that We don’t have. What would happen if we were to go bankrupt instead? We rent our home and are up to date with our rent. My car is on HP and my wife’s is on contract hire. We need them for work so would need to retain them. My car is worth just under what I owe on it.

      How would an Official receiver look at the additional income? Would any payments be based on our basic income, or would it be based month to month on payslips?

      Thanks in advance. I am trying to work out where to go from here.

      1. Hi Lee

        It sounds as though stopping your IVAs and going bankrupt would be a sensible option for you and your wife to consider. Your rented property will not be affected in any way as long as you continue paying your rent. Your landlord will not be told.

        In terms of your income the best way to present this would be to consider your average earnings over the past 6 months. You can then use this figure if you believe it will continue. If not it could be reduced. The official receiver will probably ask you for an update 3-4 months after going bankrupt to ensure the average has stayed roughly the same. One thing is for sure, because the living expenses budgets are more generous, your payments are certainly likely to be lower if you go bankrupt.

        It is difficult to say what would happen to your cars without more detail. The rule is that the OR will allow you to keep paying for them as long as the net value (the 2nd hand value less outstanding finance) is £1000 or less. Given this, most finance companies will be happy for you to keep paying for the cars. However you would need to double check with them first.

        Before making a final decision I would be happy to have a chat with you to discuss the implications in more detail. Please call if you are interested in doing this (0800 077 6180).

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