It is unlikely you will be forced to go Bankrupt if your IVA is rejected. However it could be the best option in certain circumstances.
- Do you have to go Bankrupt if your IVA is rejected?
- Can you choose to go Bankrupt?
- Could you apply for another IVA?
- Other options after your IVA is rejected
Do you have to go Bankrupt if your IVA is Rejected?
When you apply for an IVA your creditors have the option of either accepting or rejecting it. If the proposal is unreasonable or does not take into account all your assets it could be rejected.
If this happens you do not have to go Bankrupt. In fact you will not be forced or pushed into doing anything at all. What you do next will be left entirely for you to decide.
However remember that your debt situation has not changed. You need to take action reasonably quickly or it is likely that your creditors will start or continue their collections action against you.
If you stopped paying your creditors during your IVA application you may now be in arrears. You should act quickly to implement an alternative solution before your creditors start to chase you.
Can you choose to go Bankrupt if your IVA is Rejected?
Although you do not have to go bankrupt you can use this solution if you want. Depending on your circumstances it could work out even better for you than an IVA.
A significant advantage of Bankruptcy is that you only have to continue paying towards your debt if you can afford to do so. If you have little or no surplus income you will not have to make further payments at all.
Where you can afford to make payments these would only last for 3 years compared to 5-6 in an IVA.
If you are a home owner the risk to your property will depend on the equity in it. If you have substantial equity bankruptcy may not be for you.
Can you apply for another IVA if the first is Rejected?
If your first IVA proposal has been rejected you can try again if you wish. You can re-apply at any time. However you will need to change your proposal so it is more acceptable to your creditors.
This might mean including assets you previously wanted to keep out. Alternatively if your income has now gone up or expenses have reduced you will be able to increase the amount you offer to pay each month.
You can use the same IVA company to present your proposal if you like. However it is often best to use a new company who can bring a fresh perspective.
If your first IVA proposal has been rejected talk to us if you want to re-apply.
Other options after your IVA is Rejected
You may be a home owner with substantial equity. Alternatively you may just need some breathing space and more time to think. In these circumstances you could consider a Debt Management Plan (DMP).
This is an informal agreement allowing you to reduce your debt payments down to an affordable amount. There is no agreement to write debt off. You still have to pay back everything you owe.
However the Plan is very flexible. Unlike going bankrupt you can use it to give a short term breathing space from your creditors. You can then change to a different solution later if you want to.
A DMP does not give you legal protection from your creditors. There is still the risk that a creditor will take further action against you. Perhaps applying for a CCJ or Charging Order against your home.