Can I change my mind on an IVA?
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Can I change my mind on an IVA?

Due to its formal nature, an IVA can’t simply be cancelled simply because you change your mind, however, there are procedures that allow someone to bring their IVA to a premature close.

People’s circumstances can change at any time, and all it takes is a small change in circumstances for your  IVA to become unviable.

What you should consider first

You don’t have to cancel the Individual Voluntary Arrangement (IVA) if you’re struggling to pay. Talk to your insolvency practitioner straight away – they might be able to change your regular payments.

If you still want to cancel your IVA, you can – but you’ll still have to deal with your debts, and you could be made bankrupt.

How to cancel your IVA

Write to or email your insolvency practitioner and ask to cancel your IVA. You can only cancel if your insolvency practitioner and your creditors agree. They might agree to cancellation if:

  • Your circumstances mean it’s unlikely you’ll be able to pay any more money – for example, if you have a long-term illness
  • You can show the creditors you’re able to repay more money without the IVA

If they agree to the cancellation, your insolvency practitioner will fail the IVA – this means the IVA hasn’t worked and will end.

If they don’t agree to the cancellation, you could stop making monthly payments. This will breach the terms and conditions of the IVA and cause it to fail. It could take weeks or months – it depends on how quickly your insolvency practitioner takes action to fail the IVA after the missed payments.

What is an IVA?

An Individual Voluntary Arrangement (IVA) is a debt solution that allows you to pay back your unsecured debt in monthly instalments, usually over a 5 to 6 year period. After successfully completing an IVA, any debts within the plan are written off.

When you commit to an IVA, there are terms and conditions you will have to adhere to. If you don’t keep to the terms of your IVA, your plan could fail. However, you may wish to cancel your IVA and get out of the agreement before it has concluded.

Why cancel an IVA?

You may find your circumstances change whilst in an IVA. If you suffer a loss in income or become seriously ill, you may find an IVA is no longer sustainable. You may also feel there is another debt solution more suited to your budget, such as a Debt Management Plan.

If you cannot keep up with your agreed IVA repayments, cancelling your IVA doesn’t have to be the first port of call. You can contact your Insolvency Practitioner and ask them to offer you a payment break or to work with your creditors to lower your monthly repayments.

You may be in a fortunate position where you have received a lump sum of money that could be used to pay the debts in your IVA. If you have received a lump sum, you will need to talk with your Insolvency Practitioner about how the lump sum will be treated under the terms and conditions of an IVA.

Steps to cancel an IVA?

You will need to write to your Insolvency Practitioner and ask them to cancel your IVA. You could explain this over the phone, but most Insolvency Practitioners will ask you to also confirm in writing.

If you are looking to immediately stop further payments into your IVA, you can instruct your bank to cancel any standing order or direct debit you have set up. You should also confirm to the Insolvency Practitioner that you would like your IVA to be failed.

What happens if you cancel your IVA?

You can cancel your IVA but you should be aware of the circumstances that come with doing this. Your creditors will be notified and they will be able to chase you for outstanding debts and also add interest and charges again.

It’s important to understand the terms of your IVA and talk to your Insolvency Practitioner if you have any concerns or questions.

Look at other debt solution options

If you cancel your IVA, you could enter another debt solution, like a Debt Management Plan. If you are seeking a different course of action, you’ll need to be aware that you will still have to pay back your creditors and you could end up paying more as fees and interest may be added back on. To find out what your options are you can contact IVA Advice for free debt advice.

Can I cancel my IVA once it’s been agreed upon?

Yes, technically you can, but ideally, you should not cancel an IVA once it is set up. It is in no one’s interests (least of all yours) for this to happen. However, sometimes changes in circumstances make the sustainability of an IVA impossible. Changes should always be discussed with your Insolvency Practitioner. It may be that a payment break could be arranged to allow time (e.g. finding a new job after redundancy). All options will be considered – lump sum settlement (maybe utilising a redundancy settlement), reduced payments (perhaps extending the length of the IVA).

Failure of my IVA due to high repayments

A lot of people cancel their IVA because of excessive charges, unrealistic levels of set repayments and being pressured into IVAs. In many cases, IVA failure is due to the debtor stopping monthly repayments sometimes because an IVA insolvency practitioner insists clients pay unrealistic IVA payments. Communication and discussion are vital to establishing appropriate repayment levels. IVA clients are expected to make sacrifices but do have to be able to live properly.

A Notice of Breach will be issued if the IVA falls into arrears. This allows 30 days for the problem to be rectified.

No easy options

It may be that we’re simply finding the restrictions of an IVA too challenging and we crave a new car or a holiday or a quick-fix solution. However, beware of easy answers. We may hear an example of people going for bankruptcy and never looking back – but every case is different. It may be that for us, the Official Receiver will insist on a payment order being issued resulting in 3 years of payments of a greater amount than our IVA payment level. Take professional advice before making hasty decisions.

IVA failure

If you cancel your IVA then you will receive a certificate of default and failure. Your creditors will be informed of the IVA failing. It won’t be long before creditors will want to know what you propose to do about the outstanding debt. The most likely next step is to look to bankruptcy to solve the debt problem. However, it may be possible to come to an arrangement with creditors informally or to make use of a Debt Management Plan, to make some repayment on the debt. This may be appropriate if we believe our financial circumstances may improve in the foreseeable future.

What happens after your IVA fails

Your insolvency practitioner will send you a notice of termination.

You’ll still have to:

  • make arrangements with your creditors to sort out your leftover debts
  • pay your insolvency practitioner fees – if you haven’t already

Act quickly to sort out your remaining debts – your creditors might start charging interest on your debts and you could be made bankrupt by the insolvency practitioner or your creditors.

The benefits of having credit counselling

Credit counselling provides consumers with guidance on consumer credit, money management, debt problems, tax debts and budgeting. The goal of most credit counselling is to help a debtor avoid bankruptcy if they find themselves struggling with debt repayment.

Many counselling services will negotiate with creditors on the borrower’s behalf to reduce credit card and loan interest rates and waive late fees.

  • Credit counselling helps consumers with consumer credit, money management, debt management, and budgeting.
  • The purpose of credit counselling is to help a debtor avoid bankruptcy if they are struggling with their debt burdens.
  • Counselling services negotiate with creditors on the borrower’s behalf to reduce interest rates and waive fees.
  • A credit counsellor can also discuss debt repayment strategies to help you choose a method that works best for you.

Before agreeing to an IVA, consider the following things:

  1. Are you ready and willing to commit to paying a monthly amount?
  2. Do you accept that you’re entering into a legally binding arrangement?
  3. Are you willing to release equity and sell assets of significant value?
  4. Do you understand that an IVA might negatively affect your credit file for six years?
  5. Is an IVA the right solution for your needs?
Remember that IVA’s can have strict rules, and certain elements might be off-putting for some people. For example, if you manage to find a credit lender that will offer you finance, you’ll still need to get written permission from your insolvency practitioner. You’ll also be on a public register called the Insolvency Register. Still, while the IVA terms can seem restrictive, they’re designed to help you to pay off your creditors and will relieve you of debt so you can build a better financial future. As soon as the IVA starts, it will be on your file for a maximum of six years, which means that you’ll be able to rebuild your credit rating.

Would you like to discuss your debt solution options?

IVA Advice is a registered Insolvency Practitioner (IP), we support our clients to manage their debts and repay creditors. From the initial debt advice to drafting an IVA proposal and securing a legally binding agreement, we can help you manage your obligations. Our friendly team is available to discuss various debt solutions and share information on how an IVA affects your finances. Please feel free to contact our registered office today, and we’ll help you manage your creditors and relieve the weight of debt that’s holding you back.