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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120 thoughts on “Cancel IVA if Unhappy

    John says:

    Hello I’m in my last year of an IVA in which I’ve made every payment on time without fail, I’ve now been asked to realise funds against my house by remortgaging, Stepchange told me my house was worth 169,000 and i got a local estate agent to value it and they came back with a valuation of 130,000 therefore I’m unable to realise any equity in my property as i still owe 110,000 on an interest only mortgage and certainly not the 23,000 they’re expecting me too, i am prepared to make an additional 12 months payments as per original agreement, Stepchange are not accepting the valuation i had done and are saying they will send out an estate agent to value my property from Leeds?? Where do i stand, on this, can i just pay the additional 12 months, as I’ll have nearly paid 100% of the original debt by the end of the 6th year??

      Hi John

      You are obliged to co-operate with your IVA company (Stepchange IVA). Ultimately, they will only agree to waive the equity release clause and extend your IVA for 12 months if they are convinced the equity in your home is less than £5k (normally based on 85% of the current valuation).

      Given this, it is up to you to do the work to prove to Stepchange that your valuation is correct. My advice is that you contact 2 additional independent estate agents in your area and get two additional valuations. If both come out at similar amounts (ie £130k) then I don’t think you have anything to worry about.

      You will still have to let Stepchange get their own valuation if they want. But if you have 3 estate agents all saying the same thing, I think it is very unlikely that any valuer that Stepchange instruct will come up with anything different.

      Where the valuations are different you may need to take an average of all of them and work with that figure.

    Carol says:

    I have an IVA that I’ve been paying into for over 2 years and still getting debt letters that were included in my IVA. I am considering cancelling my IVA and arranging a plan with the debtors to pay direct. Is this a good idea

      Hi Carol

      If you are unhappy with your IVA, you can certainly cancel it and use a different solution such as a debt management plan to pay your debt. However, whether or not this is a good idea depends on your circumstances.

      Normally switching to a debt management plan would only be sensible if your income has gone up and so by staying in your IVA you will repay more than you originally owed. If this is not the case, then staying in your IVA might be a better option unless there are other factors in play such as the expectation of a windfall.

      Alternatively, if you are not a home owner, cancelling your IVA and going bankrupt might be the best (and cheapest way) to to get out of debt. This is especially the case if you are struggling with your IVA payments because you may not have to make any further payments at all when you go bankrupt.

      If you want to discuss your options in more detail, by all means give me a call (0800 011 4712). The advice is free and confidential.

    Stace says:

    I got advised about an iva yesterday, I signed the proposal last night but now have changed my mind and would just like to continue paying my debts as I have been. Am I able to do this ? They have sent the proposal off as soon as I asked for time to think about it as I was unsure.

      Hi Stace

      Yes you can certainly cancel at this stage. You simply need to e-mail your IVA company and inform them that you have changed your mind and you want them to withdraw your IVA proposal to your creditors. There should be no problem with this.

    Sarah says:

    Hello, I have had an IVA with Hanover since July last year. I started paying £80/mth. I was struggling and so took a 2nd job. Now they want half of my extra money which will mean the payments go up to around £500 a month. I only owe £5,500.

    They are saying that I have to pay the debts in full, but I have never been told this. Am I able to still cancel the IVA? At this point I’d rather deal with my creditors directly, as I have had to do this the entire time I have been called the incorrect name.

    I’ve had to do their work, that I have paid them to do, it’s been a rally stressful situation, and I just want to be away from the company now

    Thanks

      Hi Sarah

      If you can now afford to pay £500/mth towards your debts, it does not make any sense to stay in your IVA. You would end up paying back much more than you originally owed.

      In this situation, I would recommend that you cancel your IVA and pay your creditors yourself. You can certainly do this if you want to. The only thing to remember is you can’t approach your creditors and make payment agreements with them until your IVA is formally terminated which could take 3-6 months from the date you stop paying it.

    James L says:

    I got a iva with Hanover but I still get letters thought they would stop

      Hi James

      It can take 2-3 months for the message to get through to all creditors that you have started an IVA and they are bound by its terms. The best thing to do is contact your IVA company and let them know and ask them to write to the creditor again.

      This is not really something you should be thinking of cancelling your IVA over unless the situation goes on and on. With any luck things will settle down soon.

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