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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.

Included in this article:

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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.


Comments 90

  1. Nicky
    31.05.2019

    Hi James

    I will definitely get in touch as it’s a real struggle & I think I need some advice

  2. Nicky
    27.05.2019

    Hi
    I’m currently 9 months into my Iva I’m very unhappy with the company. I thought I was doing the right thing at the time & couldn’t afford to go bankrupt. I’m really annoyed because they have just taken £8500 of a ppi claim even though I had already tried to claim ppi 6 months either with no joy! I had no correspondence from them at all until I emailed regarding the ppi money only to get told some old toot. I explained if I’d got my ppi claim money I wouldn’t need an Iva but they just don’t seem to give a damn.

    Now I’m due a £500 tax refund from being self employed last year which again it seems I wouldn’t see a penny of that either this was going to pay my accountants fee. It feels like I’m being shafted every which way!! The company I’m with also lied at the beginning of my Iva saying my partner was earning £400 a month which isn’t true as she’s disabled can they do this? I had little option at the start as I was becoming ill over the stress of the debts etc & they said that this was the only way I could afford the Iva.

    1. 28.05.2019

      Hi Nicky

      It sounds as though the IVA may not have been the right solution for you but when you made the decision you were under pressure so it seemed a sensible way out. You are not alone. Many people start an IVA and then realise they are not the best solution for them or they simply do not feel comfortable with the company that set the agreement up for them.

      If you want to stop the Arrangement and do something else then as highlighted in the article above you can. You just need to have a plan in place for what to do then. That may be go bankrupt or use an alternative solution if there is one more appropriate for you. If you want advice about what is best for you please don’t hesitate to give us a call (0800 044 3194).

  3. Katie
    09.05.2019

    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
    Katie

    1. 09.05.2019

      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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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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