Are you struggling with your IVA? If you think you are in the wrong solution you could stop your IVA and go Bankrupt.
Jump to article contents:
- Can you stop an IVA?
- The implications of going bankrupt
- What if you are a home owner
- What happens to the money you paid into your IVA?
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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Hello
If I stop my iva and go bankrupt will the iva be removed from my credit file
Hi Karl
The answer is no. The record of your IVA will remain on your credit file for 6 years from the date it started (whether you stop it early or complete it as agreed). However this will not really cause you any issues. The record of you going bankrupt will also be added to your file and remain there for 6 years. Your credit rating will not really be made any worse by this.
Basically the effect of and IVA or bankruptcy on your file is the same. So by the time the bankruptcy record comes off your file the IVA record will also be gone. Your credit file will then be clear again.
Hi i have been in an iva for 2 years now & i have just had a couple of debts land on me from 2013 … a couple of questions id like to ask.
As i cant afford to pay these debts and think it best to go bankrupt. i would like to know 1. I am a registered keeper of a vehicle worth about 4000 pound but i do not own the car i am paying my father back on a monthly basis which he has a payment book i pay £20 per month and have paid around £460 SO far. So the question is what happens here.
And 2nd is it best for me to go bankrupt. The debts i am talking about are to the value of £3600 & with my iva & also attachment to my wages of 70 per month i simply cant afford it
Hi Darren
From what you have said stopping your IVA and going bankrupt might well make sense.
All the debt you owe would be included in the bankruptcy (both the debts currently in the IVA and the new debts that you have just been made aware of). In addition the attachment of earnings against your wages would be cancelled (the debt you are paying which is associated with that would also be included in the BK). As such your take home pay would go up by £70/mth.
Remember if you do have a surplus income you would still have to pay that towards your debts for 3 years.
In terms of the car you would need to say on your application that it is owned by your Father. The fact that it is registered to you and you pay for the running costs is not an issue. You are simply loaning the car from him. My suggestion would be that you do not highlight that you are paying him for it in your living expenses as that would complicate the situation. However given it is £20/mth you should not have an issue maintaining this payment from your other allowable expenses.
If you want to discuss this further please don’t hesitate to contact me (0800 077 6180).
Hi James
I have been in my IVA for 6 months. The agreed payment is £100/mth but I earn commissions each month so this amount goes up all the time. My IVA company do not seem to understand that I need to put money aside for when I do not earn extra. Not a home owner and thinking about cancelling and going into bankruptcy.
My worry is I have a car on lease with moneybarn which I need for my job. When I spoke to moneybarn if I could go bankrupt and keep my car they said no as it would be a breach of contract and so I have to stay in my Iva. Is that right?
Hi Janice
If you earn extra money in any month you are in an IVA you will almost certainly have to pay half of it into the arrangement. It would be unusual for your IVA company to deviate from this rule for any reason.
If you are not happy with this situation and are not a home owner then stopping your IVA and going bankrupt is an option to consider. However if Moneybarn has confirmed to you that they would have to repossess your car if you do you must accept that is what would happen. As such you have two choices:
1. Stick with your current IVA and keep the car (despite the fact you are finding it restrictive and you will have to pay 50% of any extra you earn into the Arrangement).
2. Decided that you are simply unable to continue with your IVA and want to use the bankruptcy route. However you will then have to accept that you will have give up your current vehicle and source an alternative (any shortfall on the finance will be written off with your other debts by the bankruptcy.
You can either buy a car in your own name but it must be worth no more than c£1000. Alternatively a third party (family member or friend) could buy a car for you and let you have toe use of it.