Cancelling your IVA on the right time can save a lot of money and hassle for you.
I have compiled a comprehensive article on whether or not you should get your IVA cancelled and how to go on and get done with the process.
Let’s dive right in!
IVA and Its Cancellation
So what really is an IVA?
An Individual Voluntary Arrangement (I V A) is a legal binding contract between you and your creditors. This contract is authorised and regulated by the financial conduct authority to assist individuals in paying back their debt.
It is a contract in which you subtract your daily living expenses from your income every month and pay the remaining amount to an insolvency practitioner who manages your debt and talks to your creditors directly.
This Individual Voluntary Arrangement goes on until about 5 years (60 monthly IVA payments) and then your debt ends for good.
However, in some circumstances, you might not be able to pay an IVA.
For example if you unfortunately have a long term illness, it will become increasingly hard to keep up with your IVA payments. In such a situation, cancelling your IVA might be an option to consider.
Cancelling an IVA means that you still owe your debt to your creditors. Your creditors may cancel your IVA if you can prove that you won’t be able to continue your repayments and that cancelling your IVA is the only feasible solution.
Another situation in which cancelling an IVA makes sense is if you convince your creditors that you can pay them more money if they get your IVA cancelled.
However, you shouldn’t get your IVA cancelled just because you can’t afford your payments. If you cannot afford the minimum monthly payments, consult your insolvency practitioner for advice on what to do.
He might be able to negotiate with your creditors and allow you to reduce the minimum payments on your debt. Moreover, you can also be authorised for a payment break in which you don’t have to make any monthly repayments to your IVA.
This payment break used to last up to 6 months and after October 2016, it has been extended to 9 months. Remember to use this time period wisely. Try to arrange more income sources, save money or even rethink your finances. Once this period is over, you will go back to dealing with IVA repayments again.
Why Would You Want to Cancel Your IVA?
If, for example, you have a long term mental illness and it is unlikely for you to be able to complete the duration of the IVA, it is pointless to demand monthly repayments from you.
In such a case, you can talk to your insolvency practitioner and get your IVA cancelled.
In other cases, if your circumstances change and you’re expected to come up with some inheritance or some extra cash in the near future, you can get your IVA cancelled and promise your lenders their repayments as soon as the windfall money comes into your hands.
You should definitely talk to your insolvency practitioner for advice before taking this step.
Remember, if you’re not able to afford the minimum monthly repayments on your IVA, your insolvency practitioner can most probably reduce that amount and make your budget more flexible.
You should only cancel an IVA if your circumstances are expected to change tremendously and you will be able to pay your debt back in the near future.
Don’t just contact your practitioner one day and ask them to cancel your IVA. Take your time to go over this decision with him and consult other sources for debt advice as well before finalizing your cancellation.
Is Cancelling IVA the Right Decision For You?
If you’re a logical human being, this question will go over many times in your head:
“Should I really cancel my IVA?”
This question is best answered by a person who has expertise in the area of debt advice as well as is aware of your personal circumstances regarding the repayment of the debt.
Only a person in close contact with your IVA and fully aware of your circumstances can determine whether or not it would be advisable for you to cancel your agreement entirely.
This is why it is advised to consult a licensed practitioner and explain your situation to him, then move forward with whatever you have in mind based on the advice he gives you.
Your practitioner is usually obligated to ensure data protection and he cannot disclose your case to anyone.
The data protection goes to the extent that he can’t even talk about your debts to a person you know. Most he can ask them is your contact information. No one except the insolvency practitioner will know of your debt problems so there’s no harm in taking their suggestions.
How to Cancel an IVA?
Here are the ways you could actually cancel your IVA:
IP and Creditors Agreement
In this method, you talk to your practitioner and your creditors and explain your reason for IVA cancellation to them. If they agree with your case and want you to cancel the arrangement, only then can you move forward with the decision.
Keep in mind that your lenders will only agree to the cancellation if you provide a better alternative to the IVA and promise them their money back.
Stop Making Payments
This method is not advised as it can get you to court. Not notifying your practitioner before stopping repayments can become very problematic for you. Your lenders will usually come directly after you in such a case and take you to court.
Legal proceedings when you owe someone a debt can be very frustrating as the court can even order you to sell your assets in order to pay off your debt.
What If the Creditors and IP Don’t Accept the Proposition?
If they don’t accept the proposition, you have no choice but to continue with your current agreement up until the duration that was initially agreed. The only way to cancel an IVA is to get all the creditors on board with the cancellation.
Termination of IVA
An IVA is terminated when you stop making your repayments to your lenders. Termination usually means that the debt you owe still stands and you will have to pay the practitioner the fees you owe him for his services so far.
You will have to pay back your debt. In addition, the relevant interest and statutory interest also has to be paid back to your lenders.
Can I be Taken to Court for Failure of IVA?
Yes, your creditors can take you to court if your IVA fails and your debt still stands.
Frequently Asked Questions (FAQs)
Does Cancelling my IVA Affect My Credit Score?
Yes, an Individual Voluntary Arrangement does not disappear from your credit rating for 6 years from the initial announcement of the IVA. This duration is extended if your arrangement is extended to more than 5 years.
Will I Still Have to Pay my Creditors?
Yes, cancelling your IVA doesn’t mean that your debt to your lenders end. You will have to consider some other option to pay back your debt.
Is it Really Necessary to Seek the Approval of Creditors and IP?
Yes, since the debt is owed to the lenders, it is important that their approval is obtained before taking any step to change your way of paying back the loan.
Where Can I get Free IVA Advice?
You can get free IVA help by calling the number 0800 043 40 50. Other than that, you can also check out our other articles related to IVA problems here.
Wrapping It Up
Cancelling your IVA can have positive as well as negative effects on your overall finances.
Before taking any major decision, remember to consult licensed professionals for suggestions on what to do.
If you have more questions, you can reach out to me on the given email address, I’ll be happy to provide an answer for you.