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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 you have decided the IVA is not right for you or you can no longer 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 your property might be at risk if you go bankrupt. Speak to us before deciding to cancel your IVA (0800 044 3194).

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 this is very unlikely to happen.

The only creditors who will ever consider making you Bankrupt are HMRC, a trade supplier (if you are self employed) or an individual you owe money to because they bear a grudge against you.

This is because nine times out of ten once you are bankrupt it is unlikely your creditors will recover the money you owe them. Any money you are able to pay is likely to be taken by the Official Receiver in fees. As such it simply doesn’t make commercial sense.

If you own money to normal banks and credit card companies it is very unlikely they will make you bankrupt. You will need to do it yourself.

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Comments 80

  1. John
    22.03.2021

    I’m currently in an iva. I have been in this for 3 years now and got another three years left. The IVA company are asking for my bank details pin number and now they want to access my bank direct to get statement. I am not happy with this arrangement. Could I apply for bankruptcy due to this? In the last year I have changed Jobs as a care support worker due to lockdown I have had to do more overtime would this affect bankruptcy many thanks.

    1. 22.03.2021

      Hi John

      You must never give your bank card pin number to anyone. Certainly not your IVA company.

      From what you have said I assume your IVA was with Vanguard and has now been moved to Ebenegate. Ebenegate are part of Credit Fix and they normally require ongoing payments to be taken directly from your debit card (known as a continuous payment authority). However you do not need to give them your PIN to set this up. They also do their annual reviews automatically by accessing your bank details (with your permission).

      If you are unhappy with this, you do have the option of cancelling your IVA and going bankrupt (assuming you are not a home owner). The fact the you have done overtime in the last year does not affect this option. Remember, if you continue to do overtime and this means you have a surplus income each month, you still need to pay this towards your debts if you go bankrupt. However the payments last a maximum of 3 years and would go down if your income falls (for example the overtime is cut).

      If you want to discuss the option of bankruptcy and how it might affect you specifically, give me a call here at Bankruptcy Expert. I would be happy to have a chat to you (0800 044 3194)

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ABOUT THE AUTHOR
James Falla
I have been advising people on how to solve their debt problems for over 20 years. During this time I have helped many people go bankrupt. I am an FCA Approved Person and the Managing Director of Wilmott Turner Financial Services (owner and operator of Bankruptcy Expert
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