Stop your IVA and go Bankrupt

15/03/2023
Stop your IVA and go Bankrupt

It is possible to stop your IVA and then go Bankrupt. You may want to do this if your circumstances have changed or you feel the Arrangement is the wrong solution for you.

Included in this article:

Already in an IVA and need help?

Give us a call: 0800 011 4712 or complete the form below to speak to one of our experts

Why would you Stop your IVA and go Bankrupt?

There are a number of reasons you might decide to stop your IVA and then go bankrupt. Perhaps you are struggling with the payments and cannot agree a reduction with your IVA Company.

Alternatively you may have started the Arrangement without considering all your options. You were simply desperate to get a solution in place and feel you were talked into it without the alternatives being properly explained.

What ever the reason once you make the decision you can stop your Agreement at any time. Once it is formally failed you are free to go bankrupt if you wish.

If you stop your IVA it is unlikely you will be forced to go bankrupt unless one of your creditors is HMRC.

How to Stop an existing IVA

It is possible to stop your IVA at any time by letting it fail. You do this by simply cancelling your monthly payment. You also need to tell your Insolvency Practitioner (IP) about your decision.

Your IP will normally require you to confirm in writing that you want them to fail the Arrangement. They will then begin the process. Once this is done you will receive a letter from them confirming the failure and that they are no longer acting as your supervisor.

It can take 3-6 months for your IP to fail your IVA. Very often they will not do so until your payments are 3 months in arrears. However they may be prepared to act more quickly after you have given your written consent.

Once you have instructed your IVA company to fail the Arrangement you can go bankrupt at any time. You do not have to wait for the termination letter from your IP.

Struggling to get your head round all of this? We can help. Call us (0800 011 4712) or complete the form below. The advice is free and confidential.

What happens to the Money you have paid into your IVA?

After you stop your IVA the money you have already paid into the Arrangement will be lost. You will not be able to recover any of it.

The cash is first used to pay any of your IVA company’s fees that are due. Any excess is then distributed to your creditors to reduce the balances you owe them.

As a result if you have not made many payments or the amount you were paying was relatively low your overall debt may be the same as when you started.

Once you are bankrupt you may still have to make a payments towards your debts if you have disposable income. This would be for 3 years.

Is your House at risk if you Stop your IVA and go Bankrupt?

The decision to stop your IVA and then go Bankrupt is more complicated if you are a home owner. You will first have to consider how much equity is in your property.

If there is little or no equity your home is unlikely to be at risk. In these circumstances you would be able to buy back your interest for £1000.

However if you have substantial equity it is likely your share would have to be released. If the money cannot be raised in any other way the Official Receiver in charge of your bankruptcy could force the sale of the property to achieve this.

In these circumstances, bankruptcy may not be a sensible option.

Want to stop your IVA and go bankrupt? Call us (0800 011 4712) or complete the form below for free confidential advice.

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14 thoughts on “Stop your IVA and go Bankrupt”

    Lisa says:
    30/01/2020 at 14:40

    Hello, I am currently in an IVA I have just over 2 years left. I have had a payment holiday in place since October 2019, however just applied for an extention, which they are allowing until the end of February. I have stated that I am currently unemployed due to ill health.

    They have said that they would review my case on a month to month basis. I recently married and my husband pays all the household bills and buys me anything I should need. I have no other income. Therefore I am now wondering whether going bankrupt would be a better option for me, especially if they keep adding months on at the end of the term.

    Reply
      James Falla says:
      30/01/2020 at 14:59

      Hi Lisa

      Given you currently have no income and are unsure when this situation might change I feel allowing your IVA to fail and then going bankrupt might be a sensible way out for you. This is assuming you are not a home owner so you have nothing to lose.

      At the end of the day if you can’t start paying again by February (after being in a payment break for 5-6 months) your IVA company are likely to start talking about having to fail the Arrangement anyway.

      If you would like more advice before making your final decision please don’t hesitate to contact me (0800 011 4712).

      Reply
    Jack says:
    25/01/2021 at 15:35

    Hello. I have IVA agreement with Hanover Insolvency. I got wrong informations about it and decided to cancel it and go Bankrupt as it will more suit me and Also i cant afford anymore payments on my IVA. Just wondering , once i have send e-mail to my IP supervisor about my decision that I what cancel it , Do I have to wait for the formal confirmation of before I fill Bankruptcy form ?

    Reply
      James Falla says:
      25/01/2021 at 15:40

      Hi Jack

      I confirm, once you have made the decision to stop your IVA and go bankrupt, you do not have to wait for your IVA company to terminate your IVA. As soon as you have stopped your IVA payments you can complete the bankruptcy application and submit it any time (the next day if you wish).

      You will be made bankrupt straight away and the official receiver will contact your IVA company to let them know (you can also do this yourself).

      Reply
    Rachel says:
    11/05/2021 at 14:37

    I am currently 2 years into my IVA I have just received my annual review and the payments have quadrupled meaning I’m paying more to my IVA than I was to my creditors when I was in debt, this is because as a single working parent I’m now entitled to some benefits, I feel lost and depressed and my insolvency practitioner is rude, unhelpful and belittling. What can I do in this situation?

    Reply
      James Falla says:
      12/05/2021 at 17:46

      Hi Rachel

      Sorry to hear about your situation. If your income improves during your IVA for whatever reason, your payments can go up. In some cases this can mean that you would end up paying more back to your creditors than you originally owed. Clearly this is not an ideal situation.

      If this is happening to you, you can always stop paying your IVA and cancel it. However before doing that you need to think about how you will manage your remaining debts going forward. If you are a single parent receiving benefits and living in rented accommodation, bankruptcy might well be a sensible option for you. However, to properly advise you I would need to understand your situation in more detail.

      If you would like to give me a call (0800 011 4712), I would be happy to have a chat with you and give you further advice about what would be best for you.

      Reply
    Emma says:
    24/06/2021 at 13:45

    I have currently just completed my 2nd annual review for my IVA. I have since received a tax bill for over £6000 despite paying PAYE. My tax code has increased to K37 and am paying over £1000 tax and NI. I am just about managing to make monthly payments however am currently off sick and in process of applying for a new role on £10,000 less a year. What is my best solution?

    Reply
      James Falla says:
      02/07/2021 at 14:21

      Hi Emma

      I assume that you have discussed the additional HMRC debt with your IVA company and they have confirmed that it can’t be added to the current Arrangement? Given it can’t, your options will depend on your wider circumstances.

      First and foremost are you a home owner? If not, I would seriously consider stopping your IVA and going bankrupt. This might be an ideal solution particularly if your income falls as you do not have to make ongoing payments towards your debts unless you can afford to.

      If you are a home owner and there is equity in your property, your home could be at risk if you go bankrupt. In this case, the next best option might be to stop your IVA and start a new one which does include the HMRC debt. That said, the affordability of this would have to be closely considered given your income is likely to fall. In this case you would need to calculate your surplus income based on your new expected income figure to ensure you could afford to make sensible and sustainable monthly payments.

      I would be happy to have a chat to you and discuss your options with you in more detail if you like. Please give me a call at IVA Information any time (0800 011 4712)

      Reply
    DarrenB says:
    25/01/2022 at 18:35

    hi, im currently coming up to 2 years in my IVA, my surplus income as reduced from 210pm to around 30-40 pm, what with energy prices going up and going up again in april, also my rent has gone up 175 per month.

    i was ‘sold’ the iva with the premise that i would be able to fford to treat my kids and take them on holiday but with no spare money this has not happened. im thinking Bankruptcy maybe the way to go, if i decide this how do i stop payments from my debit card to ‘fail’ the iva? i will speak to my Ip before any decisions are made. thanks

    Reply
      James Falla says:
      25/01/2022 at 18:41

      Hi DarrenB,

      It does sound as though your IVA is no longer viable and therefore going bankrupt could well be a sensible option for you.

      Once you have made your decision, given you make your IVA payments via your debit card (called a continuous payment authority), the best way to ensure these are stopped is to ring your bank and tell them your card has been stolen. They will then cancel the card and re-issue a new one with a different number. This should stop your IVA company taking further payments.

      Please note, I do not recommend that you go bankrupt without first calling me for advice. I will be able happy to explain the impact of bankruptcy for you and make sure it is the right option for you. The advice is free and confidential. If you would like to have a chat, please give me a call (0800 011 4712).

      Reply

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