Do you want to stop your IVA and go bankrupt? Perhaps you are struggling with your payments or have got into additional debt. You are legally allowed to make the switch if you decide to do so.
Our experts have all the information and advice you need to make your decision and assist you through the process.
Contents
Advantages if you stop your IVA and go bankrupt
There are some common reasons why you might stop your IVA and go bankrupt.
Firstly, perhaps you can’t afford to keep up the monthly payments. This may be because your income has fallen or living expenses have increased. In these circumstances, if you stop your IVA and go bankrupt, you are unlikely to have to make any further payments towards your debts (given you have little or no surplus income). You will then be debt free in just 1 year.
Secondly, you may have discovered additional debt or had to borrow more since your IVA started. Going bankrupt will include of all of your debts – both old and new. Everything you now owe will be written off.
Thirdly, you may feel that you did not get proper advice about the option of bankruptcy when you started your IVA. It may have always been the better option for you.
Is it possible to cancel an IVA?
You are allowed to stop your IVA at any time during the Arrangement. Your creditors can’t break the agreement, but you can cancel it.
The way to cancel your IVA is to first stop making the payments. If you pay by standing order or direct debit, you can just cancel this using your banking app or by calling your bank.
If your IVA company takes your payments direct from your debit card (called a continuous payment authority), your bank can’t stop them. For this reason, you will need to report the card as stolen. The bank will issue a new one with slightly different details. Further payments therefore can’t be taken.
When your IVA company contacts you, tell them you have decided to go bankrupt and to cancel your IVA. They may try to persuade you to stick with it. But if your mind is made up, there is nothing they can do to stop you.
Don’t stop your IVA unless you have taken advice. You need to have a clear understanding of whether switching from an IVA to bankruptcy is the best option for you. To speak to an expert, get in touch with us today.
Will your creditors start chasing you?
Once you stop paying, your creditors (the people you still owe money to) will not immediately start chasing you. This is because they still think your IVA is running.
They will not be made aware of the situation until your IVA company writes to them confirming the agreement has been terminated. This is unlikely to happen for at least 3-6 months after you stop paying. As a result, you have plenty of time to apply for bankruptcy.
It is extremely unlikely that your creditors will make you bankrupt themselves. The reason for this is that it is not in their interest. They will get less money back overall.
Do you have to wait for your IVA to be cancelled before going bankrupt?
You can go bankrupt immediately after you stop your IVA. There is no obligation on you to wait for it to be formally terminated.
Once you have made the decision, it is usually best to go bankrupt as soon as possible. Why? Simply because the sooner you start the process, the sooner it will be over.
You will only be bankrupt for 12 months. So if you go bankrupt now, you are likely to be debt free after just 1 year from reading this article.
After you stop your IVA, what happens to the money already paid in?
After you stop your IVA and go bankrupt, you need to understand that the money you have already paid into the Arrangement will be lost.
What actually happens to the funds depends how long you have been in the Arrangement (and the amount you were paying).
If you have only been paying for a year or so, it is likely that most if not all will be taken by the IVA company in fees. Where you have been paying for longer, more will have been paid off your original debts. However, amount you the still owe does not really matter. This is because once you go bankrupt, what happens is the same regardless of the amount you owe.
When is it best to not stop your IVA?
The option to stop your IVA and go bankrupt is not suitable for everyone.
- Homeowners – If you own your property and particularly where there is a significant amount of equity, bankruptcy is unlikely to be suitable for you. It may be best to stick with your IVA or consider a debt management plan.
- Short time left on your IVA – If you are already in the 5th or 6th year of your IVA, cancelling now might be a mistake. If you can afford to pay something towards your debts, you could be forced to pay for another 3 years if you go bankrupt.
- Your car is worth more than £2000 – In these circumstances, your vehicle would be at risk if you go bankrupt. You need to think carefully about whether you would be prepared to sell it and get a cheaper one.
- Company directors – You will not be able to continue working as a company director for the year you are bankrupt. You need to avoid cancelling your IVA and going bankrupt if this will cause you a problem.
Before making any decision to stop your IVA, contact the Bankruptcy Guide experts for further advice.
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