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Unhappy with my IVA can I go Bankrupt?
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Unhappy with my IVA can I go Bankrupt?

Unhappy with my IVA can I go Bankrupt?

If you are unhappy with your IVA you can cancel it and go Bankrupt. Perhaps your IVA is not right for you or you simply cannot afford the payments.

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Should you cancel your IVA and go Bankrupt?

There are different reasons why you might be unhappy with your IVA. Having considered your options more carefully since you started the Arrangement you may simply have decided it is not right for you.

Debt payments in an IVA will last for 5-6 years. In Bankruptcy they will last for 3 years. As such if you stop your IVA and go bankrupt within the first 2-3 years you might well save yourself a considerable amount.

Alternatively you may no longer be able to make reasonable payments towards your debts. If this is the case Bankruptcy could be ideal. Where you have no disposable income ongoing payments are not required.

If you are a homeowner with equity your property might be at risk if you go bankrupt. Before deciding on this course of action you should speak to one of our experts.

How to stop your IVA

An IVA is a legally binding agreement. However you can stop it and go Bankrupt at any time. The process is actually very simple. You just need to let the Arrangement fail.

To do this you simply stop making your monthly payments. You also need to inform your Insolvency Practitioner (IP) of your decision. They will normally ask you to confirm your instruction in writing (either by e-mail or letter).

Once you have stopped paying you can go bankrupt at any time. There is actually no need to wait for your IP to formally terminate your IVA. They will normally do this within 3-6 months but you can go bankrupt in the mean time if you wish.

Instead of paying into your IVA you can save the money towards your Bankruptcy fee. Your creditors will not start to chase you until your IVA is terminated.

What happens to money already paid into your IVA?

Depending on the level of your monthly payments and particularly if you stop paying within the first 12-24 months most of the money you have paid in will be taken in fees. This is quite normal and is agreed with your creditors up front.

This means that if you stop your Arrangement it is likely that most if not all of your debt will remain outstanding.

The amount you owe will only have reduced if you have been in the Arrangement for some time or your monthly payments were particularly large.

The fact that your debts may not have reduced during your IVA is not a problem. The outcome of your Bankruptcy is the same regardless of the amount you owe.

Will your creditors make you Bankrupt?

After you cancel your IVA you might consider simply waiting until one of your creditors makes you bankrupt. In this way you could avoid paying the application fee However it is very unlikely to happen.

If a creditor makes you bankrupt they will probably not recover the money you owe them. Any money you are able to pay is likely to be taken by the Official Receiver in fees. Therefore most creditors will try to enforce payment using a debt collector and/or an Attachment of Earnings or Charging Order.

It is unusual for a banking creditor to petition for your bankruptcy. This is because it is unlikely to result in them getting back the money they are owed. As such it simply does not make commercial sense.

The only creditors likely to make you Bankrupt are HMRC or an individual you owe money to. This action is not taken to recover their debt. HMRC want to prevent the tax debts from getting worse. An individual simply wants to make life difficult for you.

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20 thoughts on “Unhappy with my IVA can I go Bankrupt?

  1. Michelle says:

    I am currently in a iva for another 2 years I am struggling with the payments. I would like some advise on what I would loose etc if I declared myself bankrupt

    1. Hi Michelle,

      What you might lose if you allow your IVA to fail and then go bankrupt depends very much on your personal circumstances. You need to consider 3 arears:

      First of all are you a home owner? If so then your property might be at risk. However if you live in rented accommodation this will not be affected at all as long as you maintain your rent payments.

      Secondly do you own a car? If so and it is worth more than £1000 you might have to sell it and get a cheaper one. If it is worth less than £1000 it is exempt from bankruptcy and you can keep it as long as you need it.

      Thirdly your personal possessions. Generally you will be able to keep all of your household belongings including your clothing, furniture and electrical goods including your laptop ipad and mobile phone. The only time any of your belongings might be at risk is if an individual item is worth more than £500 on the second hand market.

  2. Tammie says:


    If I was to let my iva fail with the intention of going bankrupt would the IP inform me of my outstanding debts to my creditors for filling in the bankruptcy application?

    Also in the 3 months waiting for my iva to fail would I be likely contacted by my creditors. I am two years in to my iva and for the last 12 months I keep reading online and thinking it was a poor choice against bankruptcy

    1. Hi Tammy

      If your IVA fails you will get a letter from your IP confirming that it has been terminated. However they will not necessarily tell you what the outstanding debts to your creditors are. As highlighted in the article above it is possible that a considerable amount of the money you have paid into the arrangement will be taken in fees. As such the balances may not have gone down that much.

      Given this my advice is always to simply list the same balances in your bankruptcy application form as when you started your IVA. It is not actually a requirement to list 100% accurate balances when you complete the form. An estimate is perfectly acceptable. Whether the amounts you put down are under or over will make no difference to the outcome of the bankruptcy.

      In regard to your creditors contacting you while you are waiting for your IVA to fail you do not have to worry. They are not actually told that your IVA has failed until you get your terminantion letter. In fact even after you get this it is unlikely they would contact you for another 3 months as it takes some time for them to update their systems. Given this you have plenty of time to save up for the bankruptcy fee.

  3. Susan says:

    I am already in a IVA but even though I been in it for approximately 2yrs or more I am extremely unhappy with the service from the company I am with. Therefore I am wondering if I can go Bankrupt instead.

    In addition my only income is ESA and DLA so I will struggle to pay the bankruptcy fee. Is there anywhere I could get financial help to pay it?

    1. Hi Susan

      If you are unhappy with your IVA there is nothing to stop you cancelling it and then going bankrupt. As highlighted in the article above you would need to stop your IVA payments and tell your IVA company that you want them to cancel the arrangement.

      As you mention if you want to apply for bankruptcy the problem that you (and many others face) is finding the money to pay the bankruptcy fee. Unfortunately there is no reduction in the fee if you are on benefits or a low income.

      One option for getting the fee together is to save the money you need. Bear in mind that you will not be paying your IVA so you could put this money towards the fee instead. Your creditors will not start chasing you normally for 3-6 months after your IVA is terminated so this should give you the time you need.

      In terms of getting financial help there are some utility companies and other organisations who do offer grants to fund bankruptcy in certain circumstances. You could also investigate these options.

  4. Chris says:

    I’m currently in an IVA, 1 year out of 5. I can quite easily afford my repayments right now, but this is because of my self-employed job role; where I haven’t collected for Tax Return as of yet. I feel when I do my self-assessment my tax bill will be high and the IVA unhappy that my income is potentially higher than originally thought.

    I would like to go bankrupt to cancel the IVA and clear the Debt I owe; so I can continue working and build a better credit file to eventually purchase property. Can I do this, or will I be faulted for not accurately disclosing income (which is impossible to forecast earnings on self employment accurately.)

    1. Hi Chris

      From what you have said I understand that you can afford your IVA payments but only because you are not putting anything aside to pay your tax bill. Is this correct? If so then your IVA is not set up correctly. Your monthly IVA payment should be calculated after you have correctly provisioned for tax. If this is not happening then at the end of the year you will have a new debt in the form of a tax bill. If this is large it is unlikely you will be able to add it to your IVA and the whole arrangement is likely to fail.

      If this is the case and you are expecting a tax bill then allowing your IVA to fail and then going bankrupt might be a sensible solution for you. You are certainly allowed to do this and the new tax bill would be included in your bankruptcy.

      However be advised that bankruptcy will also have a negative affect on your credit file. Just like with an IVA the record of bankruptcy remains on your credit file for 6 years and will make getting credit difficult during this time. It means you are unlikely to be able to get a mortgage to buy a house for at least 6 years from the date of your bankruptcy.

      In addition you will be asked to give details of your income and living expenses. If you have surplus income then this will have to be paid towards your debt for 3 years. As such it will be critical to get your figures right. Given you are self employed you need to base your income on your average drawings after provision for tax. I recommend that you base your average over the last 6-12 months depending on your business. If you need more advice on this please contact us.

  5. Baz says:

    Hi, I currently have an IVA that I can afford to make payments. I have recently moved so my IVA company gave me a break on payment for 3 months. My living situation will be changing in 3 months and I now have to move again. The problem is my rent will be much higher in my new place as will be living alone – therefore I won’t be able to afford payments. Is this grounds to go bankrupt? I feel an IVA just doesn’t work for me, I have not kept up with payments on my IVA when I go over the threshold (when you have to pay 50% of overtime pay etc) so I know the debt will just be extended even further than the 5 years. I rushed into an IVA as felt bankruptcy would effect me more at the time but now feel it was the better option.

    Any advise would be great, thank you

    1. Hi Baz

      If you are renting and your car is worth £1000 or less then generally speaking there is no advantage to you being in an IVA compared to Bankruptcy. As such if your expenses have now increased and you are going to find it more difficult to continue paying your IVA failing the Arrangement and going bankrupt is a sensible option to consider.

      Remember if you go bankrupt you will have to give information about your new income and living expenses budget. If based on the changes you have some disposable income you will still have to pay this towards your debts. However the payments will only last 3 years. If you have no surplus income you will not have to make any further payments.

  6. Debs says:

    I am currently on iva but need to apply for bankrupcy. I understand there is a fee for this?

    I have been diagnosed with arthritus in all my joints and currently only receiving ssp after having been signed off. I have no means of paying this fee. What can i do?

    1. Hi Debs

      If your debt is less than £20k then rather than applying for bankruptcy you might qualify for a Debt Relief Order (DRO). This would give you the same outcome as bankruptcy but costs just £90 to implement. If your debt is greater than £20k or you do not qualify for a DRO for another reason then bankruptcy would be the next best option. There are various charitable trusts which might be able to help you pay the fee.

  7. Mark says:

    Hi. I have had an IVA for the past 6 months. Debt is 30K+. My wife and I will be moving abroad in March next year and I would like to apply for bankruptcy before moving. Is this a viable option? Is there a chance that they might refuse to make me bankrupt? Also, can I just ask my IP to fail my IVA without waiting for 3 months of no payments? Since we’re moving in March I’m afraid there won’t be enough time to apply for bankruptcy if I wait an extra 3 months. Thanks.

    1. Hi Mark

      You can stop paying into your IVA and then go bankrupt at any time. As discussed above you simply stop your IVA payments and inform your IVA company that you want them to terminate the agreement. You can then apply to go bankrupt straight away. You do not have to wait for your IP to terminate the Arrangement. Given you qualify your application will not be refused.

  8. vince says:


    Currently in an IVA, currently coming to my 1st anniversary. I currently pay 300 for child maintenance. However the EX wife has contacted CMS and now i’m ordered to pay £448 a month. MY IP are sending me new income and expenditure form to complete.

    I’m worried my IVA will be extended a further year. I rushed into an IVA as was explained to me so wonderfully. I rent my house and have no assets worth over 1000. So in hindsight bankruptcy probably would of been my better option.

    Bankruptcy was discussed however i chose not to basically because it sounded worse to hear!. I’m very worried about letting my IVA fail and starting bankruptcy process. WOuld it be sensible for me to do this??


    1. Hi Vince

      Your situation is actually pretty common. Your circumstances have changed during your IVA meaning you can no longer maintain the payments. Your IVA company may be able to reduce them but as you say that will come with a cost. If the reduction is agreed this will almost certainly go hand in hand with the Arrangement being extended for an additional 12 months.

      Given your circumstances bankruptcy is actually no worse than being in your IVA and will probably be a whole lot better for you.

      If you stop your IVA and go bankrupt you would not lose anything. Your landlord will not be told and as long as your car is not worth more than £1000 you will be able to keep it. Your credit rating will be effected in exactly the same way as an IVA (the record remains on your credit file for 6 years and then disappears). As such getting a mortgage in the future will be no more difficult.

      The clear advantage of bankruptcy for you is that it does not matter that your surplus income will fall. If your expenses are going up by £148/mth it stands to reason that your surplus must fall by the same amount. If this leaves you with no surplus you will not have to make any further payments towards your debts once bankrupt. If you still have a surplus the payments will only last 3 years compared to another 5 in your IVA.

      I recommend that you have a chat to your IVA company and see what deal can be struck regarding reducing your payments. However based on what you have said about your situation you could certainly decide to stop your IVA and go bankrupt and you would be much better off.

  9. Katie says:

    Hi, I’m currently in an iva and wanting to go bankrupt instead as I’m thinking of selling my house and the Iva company are wanting to charge fees and I’ve added 4K onto my 8k if debt, is bankruptcy a better option and after the fee will the accept a settlement once my house sells?

    1. Hi Katie

      You need to be a careful here. If you sell your house while you are in an IVA your share of any equity you release is classed as a windfall. This must then be paid into the IVA. The IVA would only be settled if the money paid in equals the total of your original debt (less any payments already made) + The IVA Company’s fees + interest at 8% per year from the start date of the IVA. If there is not sufficient money from the equity to do this then your IVA payments would have to continue.

      Given this it is not normally sensible to sell a property during an IVA unless there is zero equity in it.

      As you are a home owner stopping your IVA and going bankrupt would not help you. If you were to go bankrupt and then sell your house, again 100% of your share of any equity released would have to be paid into the bankruptcy. The Official Receiver would not accept a settlement. They would expect 100% of the debt to be repaid. In addition they would also add on their fees which are likely to be at least £10,000

  10. Katie says:

    Hi James

    Thanks for the advice, i don’t really want to sell so would make more sense to stay put, do you think it would be better for a friend to make an offer of a settlement I only have £4,000 left so have a friend offering to pay it off

    Kind regards

    1. Hi Katie

      It might be possible to settle your IVA early using money from your friend. This will depend on how much you still have to pay into your IVA and the attitude of your IVA company. Why not speak to your IVA company about this and make the offer of £4k from a third party. See what they say. If you need further advice don’t hesitate to come back and ask.

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