You can switch to a different solution if you are already in an IVA. You might want to do this if your circumstances have changed. Alternatively, perhaps you have simply realised that a different solution is a better option for you.
Included in this article:
- How do you stop your IVA and switch to a different solution?
- Is a debt management plan better for you?
- Should you go bankrupt?
- Are you allowed to start a new IVA?
Already in an IVA and need help?
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How do you stop your IVA and switch to different solution?
Even though your IVA is legally binding on your creditors, you are allowed to stop it at any time. Once it is cancelled, you can change to a different solution.
The way to cancel your Arrangement is simply by stopping your IVA payments. If you pay by standing order or direct debit, you just cancel the instruction with your bank.
But how can you stop the payments if your IVA company is taking them direct from your debit card? A simple way of doing this is to inform your bank that your card has been lost or stolen. They will then cancel it and issue a new one to you. Any payments set up on the card will also normally be stopped.
Your IVA company will contact you and ask why your payment has been missed. At that point you can inform them you don’t want to carry on with your IVA and they should cancel it. They might try to convince you to stick with it, but if your mind is made up, they can’t force you to stay in the Arrangement.
Not all of the money you have paid into your IVA will go to your creditors. Some of it will be taken in fees and charges. The amount of debt you still owe will depend on how long you have been in the IVA and the amount you have paid.
Is a debt management plan better for you?
A debt management plan (DMP) is one of the different solution options you can change to after you have cancelled your IVA.
The plan allows you to reduce the payments to all your creditors to an affordable amount. You continue making the reduced payment until your debts are paid in full. The time this takes could be reduced if you are able to settle early with a lump sum.
Switching to a debt management plan might be ideal if your income has gone up and the resulting increase in your IVA payments means you will pay back more than you originally owed. It would be sensible if it means you will pay less then staying in your IVA.
Another reason you might make this change is where you expect to get a windfall before your IVA ends.
If you get a windfall during your IVA, you will have to hand it over to your IVA company. However, where you have already changed to a DMP, the windfall money will be yours to do with as you wish.
Don’t stop your IVA until you have spoken to us about the implications and which different solution would be better for you. Call 0800 011 4712 for free confidential advice.
Should you go bankrupt?
Where your IVA is not working for you, going bankrupt is the other option you should consider. Although it sounds bad, this solution could offer some significant advantages.
In particular, once bankrupt, you no longer have to make any monthly payments towards your debt unless you can afford to. So if your income has fallen and you are struggling to pay your IVA, it could be an ideal option.
Of course, you might be able to stay in your IVA by reducing the payments. However that will usually result in the agreement being extended for 12-24 months.
In comparison, if you go bankrupt and are able to continue making payments towards your debts, these will only last 3 years. You could therefore be debt free much sooner and save yourself a considerable amount compared with continuing to pay your IVA.
Going bankrupt is unlikely to be an option for you if you are a home owner with equity in your property.
Are you allowed to start a new IVA?
You can stop your current IVA and start a new one.
Normally you would consider this option if there has been a change in your circumstances and the original IVA no longer works for you. An example of this would be where a significant additional debt has come to light which can’t be added to your original IVA.
Alternatively, your previous IVA might have failed for some reason. But now your circumstances have improved and you are in a position to make reasonable payments towards your debts once again.
The major downside to starting a new IVA is that your monthly payments also start again. In other words, you will be facing another 5-6 years of payments.
Want to change your IVA to a different solution? Call us (0800 011 4712) or complete the form below for more advice. Its free and confidential.