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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Hi
I started an IVA over a year ago and has gone up twice in that time I currently pay £227.00 a month but I have other debt of £15000.00 which includes credit cards. What should I do as I’m struggling with this debt at the moment and think I cant find a way out.
Hi Mark
If you have £15,000 of debt which was not included in your IVA you will almost certainly have to cancel the current Arrangement and do something else. Depending on your circumstances you might want to consider a new IVA to include all of your debt. Alternatively if you are not a home owner a better solution might be to go bankrupt as overall it is likely to work out far cheaper for you.
Without knowing more about your circumstances it is difficult to give more definite advice. Please give us a call if you would like to discuss your options in more detail.
Hi,
I started an IVA a year ago and have been deferring it for the last 8 months due to having a baby with my partner. It’s due to come back in October but that’s when my partners maternity pay stops. We can’t afford the child care for her to go back to work so I will be the sole provider for our household.
We won’t be able to afford the extra £272 a month. How do I go about going bankrupt? Do I have to let the IVA company know? Do I have to close my bank account too? Sorry for the questions I just have no idea where to start. Thank you
Hi Aaron
As discussed in the above article you are allowed to stop your IVA and go bankrupt at any time. You simply contact your IVA company, tell them you cannot restart your payments due to your circumstances and ask them to terminate the arrangement. They may try to dissuade you but they cannot stop you. You can then start start the bankruptcy application process any time.
If you have a current account with your bank you will need to change this to a basic account. If your account is already basic it should be fine and should remain open after you go bankrupt.
If you would like further help or advice with the process please do contact me at Beat My Debt (0800 077 6180)
Hello
I’m currently in an Iva and can’t keep up with the payments as I was let go from work , im back working now but on less money and was thinking about going bankrupt , would I qualify for bankruptcy even tho I have a job
Hi Grant
I confirm that you would qualify to go bankrupt if you are working yes. In actual fact many people I work with who go bankrupt are employed or self employed.
Remember when you complete the application form you will be asked to give detailed information about your income and living expenses budget. The official receiver will use this to calculate whether you have any disposable income. If you do you will be expected to pay this towards your debts for 3 years.
If you have zero disposable income you will not be asked to make ongoing payments. However the OR is likely to come back to you at least once during the year you are bankrupt and ask for an update. If your income has gone up at that time and you have a surplus you will have to start making payments based on that amount. As such it might be to your advantage not to take a pay rise before you are discharged.