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.

  • Reasons you might cancel your IVA
  • How to cancel an IVA
  • What happens to any money already paid in?
  • If you cancel an IVA do you have to go Bankrupt?

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

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 they gain little or nothing to gain by doing so.

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 to this 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 before taking further advice.

Once your IP has failed your IVA they will inform all of your creditors. However it is unlikely they will start chasing you for money immediately. It could take then 6 months or more to contact you.

Related Articles

22 thoughts on “Cancel IVA if Unhappy

    Ann says:

    I am in an Iva and have other borrowing because of a family problem- if I can repay this before the Iva is finished will that be ok?

      Hi Ann

      It is not uncommon for someone to borrow more while they are in an IVA to overcome an emergency. The way to deal with the problem depends on the amount of the new debt. If it is relatively small and you can repay it simply by making savings from your agreed living expenses without affecting your ongoing IVA payment that is fine. However if you are going to struggle to maintain your ongoing payment it is gping to be a problem.

      If this is the case you will need to speak to your IVA company. The easiest solution will be to agree a payment break with them. This will mean you can temporarily stop paying your IVA and repay the new debt instead. Your IVA Company will not be happy with this but if you insist they should agree given there are really few other alternatives.

    Lydia says:

    I’m in an Iva but have more debt that my Iva company will not add onto Iva due to there terms and conditions. Is my best option to cancel that Iva and start again with someone else I’m looking at other options such DMP. My income has also changed.

      Hi Lydia.

      If you have debt which your IVA company will not add your options really depend on how much new debt you are talking about. If it is a relative small amount it might be possible to resolve the issue with a payment break. This would allow you to stop making your IVA payments and instead use the money you save to pay off the new debt. The payments missed are then added to the end of the Arrangement.

      On the other hand if the new debts are quite large a payment break might not help. In these circumstances allowing the original IVA to fail and then using a different debt solution might be a better option. The new solution you choose will very much depend on your circumstances. If you can still afford to make a sensible payment towards your debts each month starting a new IVA might be a good idea. If not then you might want to consider going bankrupt particularly if you are not a home owner.

    Chris says:

    I am a few months in to an IVA with credit fix, I entered in to it after reading up on them and feeling like my debts where not going down although I was paying a fair amount each month.

    Since taking the IVA on I have thought long and hard and have realised that I would have preferred to carry on paying the debts myself and clearing them eventually on my own. I have realised that my cred it rating is going to be non exsistent after a while and being 38 when it’s done is a difficult time to start again and save, buy a house etc.

    What are my options in getting out of it and maybe taking on a debt management plan for example? If I was to speak to my creditors separately and explain my situation might they be open to me paying the debt back directly? It’s a confusing time and I fear I have entered in this situation a bit hastily.

      Hi Chris,

      You are right that having started an IVA your credit rating is affected. However before thinking about stopping it there are some very important things to consider. The first is that the record of your IVA will remain on your credit file for 6 years (from the start date) whether you cancel it or not. As such cancelling the arrangement now will not improve your credit rating. In fact doing so and then trying to manage your debts with a Debt Management Plan (DMP) might make it worse. In that scenario your credit rating will not start to improve until you have repaid your debts in full which might take longer than 6 years.

      Secondly remember the advantage of your IVA is that you only make payments for 5-6 years (depending on the terms of your agreement). After that any outstanding debt is written off. If you cancel your IVA you will lose all the money you have paid in and be back at square one again. It may then take you a lot longer to repay your debt using a DMP than would have been the case had you stuck with the IVA.

      Given this I would only advise cancelling your IVA if your circumstances have changed and you can no longer afford to make the agreed monthly payments.

    Deborah says:

    I don’t know if anyone can help me but I’m am really fed up with my Iva company. After a change of financial circumstances in dec 16 I sent the appropriate paperwork they required and they then cancelled my direct debit ! The last year all I have done is send in paperwork without getting g closer to actually reinstating my direct debit.

    I have sent everything they have asked and yet they are still wanting more. Because of this I haven’t paid anything for over a year and now my Iva will be extended for another year , I spoke to someone yesterday and now they are wanting me to send more evidence in all I want to do is get it paid and get out of it.

      Hi Deborah,

      It sounds as though the IVA company you are working with is not being particularly helpful. However given you are already in an IVA you really only have two options. The first is to agree a way forward with your current company.

      If you feel that this is not possible the only other option is to let your Arrangement with them fail (see the article above for more info on this). You could then start again with another IVA company or consider using an alternative debt solution. Clearly this option will depend on the amount you have already paid into your current arrangement.

    Elaine says:

    We are in an IVA. I was wondering if it can be cancelled and we can go back to being on a debt management plan?

      Hi Elaine

      Yes you can cancel your IVA and start a new debt management plan if you like. However you should think this through very carefully. If you carry on with your IVA after you have paid the agreement payments (which will normally last a maximum of 5-6 years) the arrangement will end and any unpaid debt will be written off.

      However if you stop paying your IVA then as highlighted in the article above you risk losing the money you have already paid into the plan. You would then still owe the same amount as when you started. If you then begin paying the same monthly payment towards your debts using a debt management plan it could take you much longer than 5 years to repay what you owe.

      As such I would only recommend stopping your IVA in certain circumstances. For example if you feel that your IVA company is asking you to pay an unreasonable amount and you cannot reach a mutual agreement with them. Alternatively if your circumstances have changed and you can non longer afford the payments. However if it is the latter then rather than a debt management plan you should consider going bankrupt after your IVA is cancelled.

      Note: If you are a home owner do not stop you IVA without speaking to an expert first. By all means call us at IVA Information (0800 011 4712) if you want to talk any of this through.

    Daniel says:

    I want to cancel my iva. I am now in a much better position than when I signed up and would rather deal with my creditors directly. Can I do this?

      Hi Daniel

      Your question is very similar to Elaine’s above. As with Elaine you can stop your IVA if you wish. However if you do you risk losing the money you have already paid into your Arrangement. If you are only a year or two into it and have been paying £100 or less a month the money you have paid will be taken in fees by the IVA company. As such you would still owe the same amount as when you started.

      That said if you can now afford to pay much more a month if you stay in the plan you might end up paying more than the original debt your owed because ultimately you are liable to pay the total debt, IVA company fees and interest at 8% a year from the start date of your IVA. If this is the situation you are facing then letting your IVA fail and paying off the debt yourself might leave you in a better position in the long run.

    Tommy says:

    Hello.

    I am currently paying into an iva and have been told they will take any money i earn in over time. My wages vary each month and i have to do more hours sometimes as part of my job. Can i cancel my iva? I don’t want to work extra hours for them to take the lot. Thanks

      Hi Tommy

      If you earn overtime in any particular month you do need to tell your IVA company. BUT you do not have to pay it all into your IVA. You can earn up to 10% of your normal monthly take home income and keep the lot. Anything over this is split 50/50 between you and your IVA. As such you will always keep at least 50% of any overtime you earn.

      If you are unable to live with that then as highlighted in the article above there is nothing to stop you cancelling your IVA if you wish. You can do this at any time by stopping your payment and telling your IVA Company that you want them to fail it. However it is important to understand that you are likely to lose the money you have already paid in. You would then be back to square one again facing the prospect of having to pay back all your debt.

      As such you have to think very carefully before you cancel your Arrangement. Generally the only reason you would do so is if you simply cannot get on with your current IVA company and you are prepared to start again with a different one. Alternatively if you have decided that an IVA is not for you and you want to go bankrupt.

    Rena says:

    Hi. Can i make an offer to pay a certain lumpsum to my IVA? If i can will this change my credit status and will i be able to buy a house?

      Hi Rena

      It is certainly possible to settle your IVA early with a lump sum. Generally speaking the money has to come from a 3rd party or a source which would not otherwise be available to your IVA (for example money released from your pension or equity released from your house).

      There are advantages to settling early. However it is important to understand that it will NOT help improve your credit rating. The record of the IVA will remain on your credit file for the full 6 years from its start date regardless of the date you complete it.

      Once you have completed an IVA it is possible to get a mortgage. However you will not be able to gain access to high street lenders and the best mortgage interest rates until the record has come off your credit file (6 years after the start date).

    Dillon says:

    Hi.
    I have recently agreed to an Iva in the past month however my circumstances have changed dramatically. I have asked my insolvency practitioner to cancel my Iva but they have said no. Is this legal? thanks

      Hi Dillon
      If your circumstances have changed and an IVA is no longer suitable for you then your IVA can be cancelled. As highlighted in the article above the way you do this is simply do not make any further payments towards it. You then instruct the IVA company to terminate. Ultimately if you are not making any payments they will most certainly do so sooner or later.

      Having said that if the IVA was accepted at a creditors meeting it does legally exist. As such even if it is now terminated the record of it having existed cannot be rubbed out. It will still remain on your credit file for 6 years.

      In addition if you are a home owner you need to take some care. It would be unusual but in some IVA agreements (especially ones where HMRC is a major creditor) there could be a clause saying that if your IVA is terminated then your Insolvency Practitioner must petition for your bankruptcy. As I say this is unlikely if you have no HMRC debt but you need to double check it before terminating the agreement.

    Lilian says:

    I want to cancel my IVA. I have been in it 6 months but my situation has changed and I am able to offer my creditors a better monthly payment. I cannot cope with all the restrictions. Also if I stayed with them I will now pay more than my debts are.

      Hi Lillian

      There is nothing to stop you cancelling your IVA if you wish. As highlighted in the article above you simply need to stop paying your monthly payments and inform your IVA company that you want them to terminate the arrangement. You can then set up a plan to pay your creditors yourself. If you think you will end up paying much more than you owe if you continue with the Arrangement this might be a sensible option.

      Remember if you do go down this route you will lose all the money you have already paid into the arrangement. This will be taken by the IVA company and put towards their fees. As such you are still likely to owe the same amount as when you started. You need to factor this into your decision making.

      Also if you are a home owner you need to consider whether or not your creditors will force you to go bankrupt if your IVA fails. However even if you are unless you owe money to HMRC this would be very unlikely.

    Joanne says:

    Hi I have been in my IVA for about 2.5 years. I have recently been transferred to another company without being told first. I am not happy that the majority of my money do far has been paid on fees and not off my actual debt. I’m currently on maternity leave and my husband is out of work. My debts don’t seem to be going down and I don’t know what to do anymore.

      Hi Joanne

      It is relatively common for an IVA to be transferred to a different company half way through. Normally it happens because the original company has decided to stop trading. There has been quite a lot of consolitation in the IVA market over the past couple of years and so such transfers have been on the increase.

      If it happens you have no say and there is nothing you can do about it. Having said that it should not cause a major issue. You should be able to simply continue paying your IVA as before.

      In terms of the money you have already paid in it is quite normal for the the majority of this to be taken in fees in the first year or two (especially if you are only paying £100 or so a month). However this is not a concern. Your creditors are fully aware of it and in fact agreed to it when they agreed your IVA proposal.

      As long as you maintain your payments until the end of the Arrangement the creditors will be repaid the percentage of their debt they originally expected and any outstanding debt will be written off. You will then be debt free.

      Having said all that if given your situation you are now struggling to maintain the payments or for some reason you cannot get along with the new company this is a different issue. In these circumstances a better option for you might be to let your IVA to fail and then go bankrupt. However before making this decision you should get further advice. Please do not hesitate to give us a call here at IVA information and we will be happy to have a chat with you.

Leave a Reply

Your email address will not be published. Required fields are marked *