Unhappy with my IVA can I go Bankrupt?
- 24 Dec 2021
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.
Included in this article:
- Should you cancel your IVA and go Bankrupt?
- How to stop the Arrangement
- What happens to money already paid into your IVA?
- Will your creditors make you bankrupt?
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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.
Hi, my wife is in an IVA. she is struggling to pay due to health and covid situation etc. They are not helping at all and asking her not to buy food at work and make sandwiches instead, however she is immune suppressed and work has no cold facilities for her to store sandwiches etc. They are being completely unfair. Theyve told her to get public transport instead of using Diesel but this is no good in Cornwall with poor transport links and the fact she needs transport for ongoing regular eye and health appointments. She is considering going bankrupt but they have told her that she cant and even if she did then she still has to pay the creditors and them? She uses a car that I own. Can she go bankrupt
Hi Paul
Sorry to hear about your wife’s situation. Her IVA company sound as though they are being totally unreasonable.
I assume you are not homeowners and are living in rented accommodation? If so, it sounds as though stopping her IVA and going bankrupt would be a very sensible solution to her problems.
The official receiver will not tell her to stop using the car…… Given you own the vehicle and not her, this would not be an issue.
Before making any decisions, I would be happy to have a chat with you and discuss her situation in more detail. If you would like to do that, please give me a ring when you’re free (0800 044 3194).