How to cancel your IVA and go bankrupt

Are you struggling with your IVA payments? Do you feel it was the wrong solution for you? You can cancel your IVA and go bankrupt instead.

Our experts will give you all the advice and support you need to understand your options and manage the change. Give us a call on 0800 180 8013 or contact us online and we’ll get back to you as soon as possible.

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Can you cancel your IVA and go bankrupt?

You can cancel your IVA at any time after it has started.

The agreement is legally binding on your creditors but not on you. Because of this, you can break it and stop your payments at any time.

After you cancel, it will normally take the company managing your Arrangement between 3-6 months to formally terminate it. However, if you have already decided that going bankrupt is a better option, you don’t have to wait.

You can go bankrupt as soon as you stop your IVA payments.

Don’t stop paying your IVA and apply for bankruptcy without speaking to us first. You need expert advice to ensure you understand all the implications. Get started with our IVA experts today!

What are the main implications if you stop your IVA?

• You will not get back the money you paid in

The money you have already paid into the Arrangement will be used in the following ways:

The company running the Arrangement will keep some of it to cover their fees and costs so far incurred.

Your creditors will get any funds left over.

• You still owe your original debt

After you cancel your IVA, your creditors will also cancel the agreement they made to write off some of your debt.

This means you will still owe almost all of the original debt you had before the Arrangement started.

If you decide not to go bankrupt, you will have to put in place an alternative solution for managing your debts. 

• The record of your IVA will remain on your credit file for the full 6 years

Even though you have cancelled your IVA, the record of the Arrangement will remain on your credit file for the full 6 years from the start date.

This means that your credit rating will not immediately improve. Ultimately this does not really matter if you then go bankrupt because, it will affect your credit rating in the same way.

How do you cancel your IVA after it has started?

Once you have made the decision, it is surprisingly easy to cancel your IVA. You just need to follow these simple steps:

1. Stop your payments

The first thing you need to do is stop your IVA payment. The company managing your IVA will not cancel the agreement if you continue to pay it – even if you tell them to.

• Direct Debit Payments – Simply cancel the direct debit using your banking app or by calling the bank.
• Debit Card Payments – Normally the bank can’t cancel these. The best option is to report your card lost or stolen. Your bank will re-issue you with a new one with a different number. This should prevent your IVA company taking further payments.

2. Tell your IVA Company

After cancelling your payments, the next step is to inform the company managing your IVA.

When you speak to them, you can explain that you have decided that the Arrangement is no longer best for you and you want them to stop it.

They may try to persuade you to carry on with your IVA. However, if your mind is made up, they can’t do anything to stop you.

It is not strictly necessary to tell your IVA Company. If you don’t want to talk to them about it, you don’t have to. You can still go bankrupt

3. Do you have to tell your creditors?

No. You do not need to speak to your creditors. Your IVA Company will inform them when they have formally terminated the agreement. They will also be notified that you have gone bankrupt by the Official Receiver.

Generally speaking, from the month you stop paying, it will take 3-6 months for your IVA to be formally terminated. Your creditors will not be chasing you for money during this time because they will not be aware of the change.

Why would you cancel your IVA and go bankrupt?

There are various different reasons why you might decide to cancel your IVA and go bankrupt.Here are some of the main ones:

• IVA was never the right option for you

After starting your IVA, you have now decided that it was never the best option for you in the first place.

Perhaps you rushed into the agreement too quickly. Maybe you feel you got bad advice and you did not get a proper explanation about the option of bankruptcy at the time.

• You can’t afford the monthly payments

Your situation might have changed during the Arrangement meaning you can no longer afford to pay it. Perhaps your income has gone down or your living expenses have increased.

You might be able to get agreement from your IVA Company to reduce your payments. However this is not always possible and will almost always come hand in hand with an extension of the agreement for 1 year.

• Your Debt has increased

Perhaps you have become aware of a debt you owe that you did not include in your IVA. Maybe a creditor has recently contacted you and demanding payment for a debt you forgot to include or did not even know about.

Alternatively, you may have borrowed more since starting the Arrangement and now you are struggling to pay both.

It is sometimes possible to add additional debt to an existing IVA. However, this will depend on the amount. Adding debt to an existing Arrangement will also mean extending the number of payments for 1 year.

Get in touch by leaving us a question, or give us a call on 0800 180 8013 and we’ll talk you through your specific circumstance.

When is it better to remain in your IVA?

You may be questioning whether starting your IVA was the right choice. There are a number of circumstances where is probably is.

Your IVA is almost complete

If you only have 1-2 more years of your Arrangement remaining and you can afford to maintain your payments, sticking with it might be the best thing.

If you cancel and then go bankrupt, you will be required to continue paying your surplus income towards your debt for 3 more years.

Unless your income has fallen and you can no longer afford the payments – or there are other significant reasons – going bankrupt could end up costing you more.

You are a home owner

If you own your home and there is significant equity in it, going bankrupt would put the property at risk.

One of the main benefits of your IVA is that your property is protected.

You may be required to attempt to release equity. However, in the majority of cases this is unlikely to be possible. Either way, you will not be forced to sell your home. You will still own your property after your IVA is completed and your unpaid debts written off.

You have made preferential payments to family or friends

A preferential payment is where you paid back one creditor in full over and above other creditors.

This often happens if you come into some money and decide to pay back debt you owe to family or friends. However, you leave other bank debts outstanding.

This type of payment does not affect you getting an IVA for your remaining debts. However, if you go bankrupt within 2 years of making the payment, the person who received the money may have to pay it back.

In addition, if you gave away money or assets within the last 5 years, these may have to be returned if you go bankrupt.

Where either of these situations apply to you, staying in your IVA might be the safest option.