An IVA is a legally binding agreement. Nevertheless, it is possible to stop and do something else if you want to manage your debts in a different way.
Included in this article:
- Is it possible to stop an IVA once it has started?
- What do you need to do to cancel your IVA?
- What are the implications?
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Is it possible to stop an IVA once it has started?
You may have already started an IVA, but then change your mind. If so, you can stop the agreement if you want.
It doesn’t matter how long you have been in the arrangement for. Perhaps you have only made a couple of payments or not yet made any at all. Perhaps you have been paying for over a year. If you believe it is not the right solution you can stop at any time.
There are various reasons why you might decide to do this. Maybe you have decided that you made the wrong decision and it is not the best solution for you. Perhaps you can no longer afford it. Alternatively your IVA company might have changed and you don’t like the new one.
You can’t be forced to carry on with your IVA if you decide it is no longer right for you. You can stop it at any time.
What do you need to do to cancel your IVA?
The way to stop your IVA is actually pretty straight forward. All you need to do is cancel your payments.
Where you are paying via direct debit, simply cancel this instruction with your bank. You can call them or use your internet banking facility to do this.
Some IVA companies take payments from your debit card. This is known as a continuous payment authority. You might be able to stop this by calling your bank and instructing them to cancel the authority. If they say they can’t, the next option is to report your card lost or stolen. The bank will issue a new card. All continuous payment authorities set up on the old one should be cancelled.
As well as stopping your payment you should also tell your IVA company that you want them to cancel the agreement. They may try to persuade you to stick with it. But if your mind is made up, there is nothing they can do to stop you.
From the date you stop making your payments it will take at least 3 months for your IVA company to formally terminate the agreement. However some can take a lot longer than this.
What are the implications if you stop your IVA?
Before deciding to stop your IVA you need to understand the implications.
It is important to understand that cancelling your IVA will not improve your credit rating. The record of the IVA will remain on your credit file for the full 6 years (from the start date) whether you stop it or not. Trying to improve your credit worthiness is not a good reason to stop an IVA.
Not all of the money you have paid into the agreement will go towards your debt. Your IVA company is allowed to take some of it to pay their fees. Because of this, you could still owe the same amount of debt as when you started. You must therefore have a plan in place for what you will do next to manage your debt. This may be starting a totally different debt solution such as a debt management plan or going bankrupt.
What about ongoing collections action from your creditors? Generally speaking it will take 6 months or more from when you stop paying an IVA for them to start collections action against you . You will therefore have plenty of time to put an alternative plan in place to deal with your debt.
One thing you don’t need to worry about is being forced to go bankrupt. In the vast majority of cases this will never happen because most banking creditors will not take this action against you. The only time it is a risk is if you owe a significant debt to HMRC. Applying for bankruptcy might however be something that you should consider doing yourself.
Want more advice about stopping your IVA and the alternative options open to you? Give us a call (0800 011 4712) or complete the form below and we’ll call you.