There are various reasons why you might want to, or need to terminate your IVA. The IVA is a legally binding arrangement but can you break it, stop paying the IVA and go bankrupt instead?
Jump to article contents:
- Are you allowed to stop your IVA
- When is bankruptcy a better option
- Will you lose the payments already made
Considering ending your IVA? Give us a call 0800 077 6180 or complete the form below to speak to one of our experts.
Are you allowed to stop your IVA
Simply, yes you can stop your IVA. There are various genuine reasons why you might want to do this. Most commonly the payments become unaffordable or you simply believe that you have chosen the wrong solution.
The way to cancel the Arrangement is to stop making your payments. You should also contact your IVA company and tell them you want them to terminate it. They may try to persuade you to stick with the Arrangement. However if your mind is made up they cannot stop you.
You will receive a formal letter from your IVA company confirming the termination. This will normally happen between 3-6 months from when you made your last payment.
Your creditors are unlikely to contact you for at least 3 months from the point you stop paying your IVA. They will not be aware anything has changed until your IVA company tell them it has terminated (the same time as you receive this confirmation).
When is bankruptcy a better option than an IVA?
There are a number of circumstances where paying an IVA for 5-6 years does not make sense.
An IVA is designed to protect your home. If you are a tenant paying rent you have no property to protect. If you go bankrupt your landlord’s property is not affected. It is very unlikely that they will be told and you will be able to continue living their without issue.
To complete an IVA you will normally have to sustain monthly payments towards your debts for 5-6 years. In bankruptcy you will not have to make any further payments if you have no surplus income. If you do have a surplus payments will last just three years.
If your car is worth less than £1000 you will be able to keep it if you go bankrupt. In addition you can keep all of your household possessions unless they are excessively valuable.
If you own a home you need to be careful about bankruptcy. If you have little or no equity it might still be an option. Call us (0800 077 6180) or complete the form below to discuss this with one of our specialists.
Will you lose the payments already made?
If you stop paying your IVA you will not be able to get any of the money you have paid back. It is also important to understand that not all of this will have gone towards repaying your debt.
Your insolvency practitioner has the right to charge fees for implementing and managing the Arrangement.
If you have only been paying for a short period or your payments are relatively low then a high percentage (if not all) of what you have paid will be taken by the IP to cover their costs.
Once you have stopped your IVA you are therefore likely to find that your total outstanding debt is the same as when you started the Arrangement.
Once you stop your IVA it is very unlikely that your creditors will make you bankrupt because it is not in their interest. Normally you will have to make the application yourself.
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