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?
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.