Cancel IVA if Unhappy

Cancel IVA if Unhappy

It is possible to cancel your IVA if you are unhappy. However there are certain implications that you will need to be aware of.

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Reasons you might Cancel your IVA

You might want to cancel your IVA for a number of reasons. One of the most common is if you have suffered a change of circumstances. As a result you can no longer afford the agreed payments.

Alternatively since you started the agreement you may have had more time to think about your options. It is possible that you now believe that there is a better way for you to solve your debt problem.

Finally you may be unhappy with the Company you are working with. It is not possible to transfer your IVA to a different provider. However you could cancel it and start again with a different provider if you wish.

If your income falls or expenses increase during your IVA you should speak to your IVA Company. It might be possible to reduce your payments and keep the Agreement going.

How to Cancel an IVA

If you have decided to cancel your IVA you can do so relatively easily. First stop your monthly payment by cancelling your standing order. You then need to tell the company managing the Arrangement you want them to fail it.

Generally you will have to confirm your instruction in writing. Most IVA companies will accept an e-mail but you might have to send a letter. They will then start the process of failing the Arrangement.

Once your IVA has been failed you will receive confirmation of this in writing. Because you are no longer in an IVA your details should be taken off the Insolvency Register.

Your IP is usually unable to fail your IVA until your payments are three months in arrears. During this time you are still protected from your creditors.

What happens to money paid into your IVA if you Cancel?

After you cancel your IVA your IP is allowed to draw their fees and costs from any money you paid into the Agreement. After these deductions any remaining money is paid to your creditors.

However it is likely that a considerable amount of the original debt you owed will remain outstanding. You are still liable for 100% of the outstanding balances.

Given this before you cancel you need to decide how you will manage the remaining debt. The options you might consider are a Debt Management Plan or Bankruptcy. However you could also start a new IVA

If you cancel an IVA within the first couple of years and your monthy payments were relatively low it is likely that all your original debt will remain outstanding.

If you Cancel an IVA do you have to go Bankrupt?

One of the concerns you might have about cancelling your IVA is whether or not you will be forced to go Bankrupt. In fact this would be very unusual. More often than not your creditors gain little or nothing by taking this course of action.

Even if you are a home owner your creditors will normally avoid making you bankrupt. They are far more likely to restart standard collection procedures against you such as employing debt collectors or applying for a CCJ.

The one exception is if you owe money to HMRC. They may have stipulated that if you do not meet the terms of your IVA you must be made bankrupt. If HMRC is a creditor you should not cancel your Arrangement before taking further advice.

Once your IVA has failed actually making yourself bankrupt could be a sensible option to consider particularly if you are not a home owner.

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74 thoughts on “Cancel IVA if Unhappy

    Husna Begum says:

    Hello,ive been in an iva for a year now and have to do my yearly expenditures form I’m worried because my modification to my iva was for me to work and I still don’t have a job

      Hi Husna

      This does seem to be an unusual modification. However if this what the agreement states I assume there must be provision for what happens if you are unable to find a job. In these situations the current status que should continue. I suggest you speak to your IVA company asap and let them know your circumstances have not changed. I would hope there would not be an issue.

    JSmith says:

    I have taken out an IVA two years a go. My debt was £16,089.00 not including the supervisor fee and nominee fee. Within the two years my wages increase and expenses decrease which allows me to increase my payment from £102 to £700 a month. When I pay £14,336.00 into my IVA, I called and emailed to find out my balances and how much more I have to pay off.

    THEY INFORMED ME THAT I HAVE £16,800.00 REMAINS TO PAY. My debt was £16,089.00, I have paid £14,336.00. OVERALL I WILL BE PAYING £31,136.00.

    When I ask why do I have that remaining to pay when my debt was only £16,089.00 they said something about dividends and I will be paying more then I owe.

    At the beginning of the agreement HANOVER let me know IVA will be better for me and I ask over the phone; “do I need to pay more then my debt and can I pay it off early? ” He informed me just the admin fee and once all my debt is paid off I do not need to pay anything else.

      Hi JSmith

      Your problem is due to a commonly misunderstood fact about IVAs (and it seems that Hanover may have misinformed you about this). If you start an IVA your payments can increase if your surplus income increases (which is what has happened in your case). However the increase does NOT mean that your IVA is paid off faster. The terms of most IVAs state that where possible during the Arrangement you must pay up to 100% of your original debt PLUS the IVA company fees and costs PLUS interest at 8% pa on your original debt. This is not just a small increase for an “admin fee”. It is possible to end up paying thousands more than you originally owed.

      This situation is uncommon. It has happened in your case because your surplus income has risen by so much. You now have two options. You carry on with the IVA and pay £16800 more. Or if you wish you can cancel the agreement and pay off the debt yourself. You should ask your IVA company to confirm how much of the money they have collected from you so far has been paid to your creditors. You will then be able to see what you will be left to pay if you cancel the arrangement.

      Note for others in a similar situation: If your surplus income increases significantly during your IVA, contact us immediately. We can give you independent advice regarding what the impact will be in terms of the amount you will end up paying and whether stopping your IVA and doing something different is a better option for you.

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