Cancel IVA if Unhappy

10/11/2024
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.

Included in this article:

Already in an IVA and need help?

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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 officially terminated, you will receive confirmation of this in writing. Because you are no longer in an IVA your details will be taken off the Insolvency Register. This normally happens within 3 months of the termination date.

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.

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 your already paid into your Arrangement?

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 monthly 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.

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.

Need help with cancelling your IVA? Give us a call (0800 011 4712) or complete the form at the bottom of this page. The advice is free and confidential.

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122 thoughts on “Cancel IVA if Unhappy”

    Daniel says:
    13/03/2018 at 12:30

    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?

    Reply
      James Falla says:
      13/03/2018 at 13:13

      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.

      Reply
    Tommy says:
    23/03/2018 at 17:45

    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

    Reply
      James Falla says:
      23/03/2018 at 18:01

      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.

      Reply
    Rena says:
    28/03/2018 at 09:41

    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?

    Reply
      James Falla says:
      28/03/2018 at 09:55

      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).

      Reply
    Dillon says:
    25/04/2018 at 11:05

    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

    Reply
      James Falla says:
      25/04/2018 at 11:14

      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.

      Reply
    Lilian says:
    11/05/2018 at 15:33

    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.

    Reply
      James Falla says:
      11/05/2018 at 15:49

      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.

      Reply

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