Can I Legally Cancel My IVA at Any Time? What Happens?

Thinking about cancelling your Individual Voluntary Arrangement (IVA)? Not sure what will happen if you do?

You’re in the right place to find answers. Over 12,000 people visit our site each month to get guidance on debt topics, just like this one. 

In this article, we’ll cover:

•  What an IVA is, and why you might have one
•  What it means to cancel an IVA and when you can do it
•  The effect on your credit score if an IVA gets cancelled
•  What happens if your IVA fails and how to avoid becoming bankrupt
•  Other options to deal with your debt if an IVA isn’t right for you

We understand your worries about paying a debt and the stress it can bring; some of our team have also been there. But don’t worry; we’re here to help you understand your options and make the best choice for your situation.

Let’s explore the world of IVAs together.

What if I change my mind about an IVA?

You can change your mind about using an IVA at any point before the IVA is approved and becomes legally binding. 

If your IVA has been approved and you change your mind after, you will have a few options:

1. Ask creditors to agree to cancel your IVA (very difficult!)
2. Try to settle the IVA in exceptional circumstances
3. Allow the IVA to fail

I will be covering these three possible scenarios below. 

Can my IVA be cancelled?

Questions on whether you can legally cancel an IVA are very common.

Source: https://forums.moneysavingexpert.com/discussion/1501605/cancelling-an-iva 

I’ve been asked this question many times directly myself. So what is the answer?

Your IVA can be terminated if you stop making repayments as per the IVA agreement. This is known as your IVA failing. 

Some people choose to purposefully not make IVA payments for different reasons. One of those reasons is that they’re struggling to meet their repayment obligation.

But there is a better way to deal with such a situation…

Can you cancel an IVA after 2 years?

The Insolvency Act 1986 doesn’t give any reason why you would be able to cancel your IVA after two years. 

If you received a windfall, you might be able to negotiate a full and final settlement offer to end your IVA earlier than agreed. But this would need to be negotiated with creditors. 

In fact, some IVA agreements include a windfall clause that makes you cough up to end the IVA, should you receive significant money. 

But that’s not the full story…

Can I cancel my IVA before the creditors’ meeting?

You’re not bound by the terms of an IVA until it’s approved within the creditor meeting. 

If you don’t want to go ahead with an IVA, you should inform your IP as soon as possible before the creditor meeting starts. 

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Struggling to pay your IVA

Citizens Advice states that you should tell your IP as soon as you realise you’re struggling to keep up with IVA payments. 

They might be able to renegotiate smaller repayments or even give you a break from repayments for a while.

If there is a significant reason why you can’t afford payments anymore, such as being seriously injured or being diagnosed with a serious medical issue, the IP might be able to negotiate to have your IVA settled early. This would mean having all the remaining debt written off. 

What happens if your IVA fails?

If your IVA fails then you will still owe all the creditors your debt. 

The creditors can take you to court to make you pay, and they could even petition to make you bankrupt to get their money. 

Although bankruptcy is quite rare, it’s still an option for creditors. Bankruptcy would have serious consequences for your short-term and long-term financial future. 

“I was mis-sold an IVA” 

The IVA industry is heavily regulated. You must have received professional and impartial advice before entering into an IVA. 

If you think you didn’t get the right advice before signing up for the IVA, you could make a complaint about a debt management company or your IP.

Complaints need to be lodged directly. If the response is inadequate, you can escalate the complaint against the IP or debt management company to the Insolvency Service or Financial Ombudsman Service, respectively. 

How to avoid bankruptcy after a failed IVA

When an IVA fails you may need to act fast to prevent creditors from making you bankrupt. 

Contact each creditor individually to try and arrange a repayment plan. If this isn’t an option you could simply ask them to pause taking further action while you assess your other options to repay. 

Alternatives to an IVA

An IVA is one of many debt solutions. There are other solutions you might qualify for, and some of them will also write off some of your debt. 

It won’t be easy switching from a failed or terminated IVA to another debt solution, especially if creditors are set on taking legal action or making you bankrupt. But it’s worth exploring your options, which you can do on my main debt help page. 

Can you cancel an IVA? (Summary!)

An IVA is a legally-binding debt solution. As such, you can only legally cancel an IVA in the following situations, which are all quite rare:

1. Your creditors agree to terminate the IVA
2. You settle the IVA early with creditor approval due to a significant event, such as a serious diagnosis or injury
3. You receive a windfall and agree to pay off the debts early

The only other way to end the IVA is if the IVA fails. You can often avoid this by speaking with your IP and coming up with a new proposal. But if it does fail, you can be taken to court and even made bankrupt.