Failed IVA

Introduction to Failed IVA

If you have debts of over £15,000 and do not want to be declared bankrupt, the best option will be to look at entering into an IVA. This is an independent voluntary arrangement and is a system where you agree to pay off a certain amount of your debt each month. This will normally mean that you will not have to pay up to 75% of the debt. There are strict regulations however and there are penalties to be paid if you miss payments.

There are many advantages to this such as having interest frozen and it is also more than likely that your debt will be cleared in 5 years. You no longer have to worry about answering phone calls or opening letters from creditors as your advisor will deal with all of this for you.

Problems with an IVA

Although there are many advantages, it is also possible to find that you suffer in some ways for taking on this agreement. It does mean that your credit rating will be affected and this could be for up to 6 years. It will show up on any credit checks made, although when you have paid it off that information will also be given.

What If The IVA Fails?

In some cases the IVA fails before it has really begun. If the parties cannot agree a monthly payment it may be best to have a cooling off period. You can then have your creditors approached. Hopefully they will consider that you are still prepared to tackle your debt and may be a little more lenient.

It is possible that however well you think the deal has been arranged that your circumstances will change again and the IVA will fail after some payments have been made. This is when you can no longer pay the agreed payment and the debts are not being reduced. There are a number of things that could happen then.

1. The company will write off the debt. This does sometimes happen, but they will only do this if they think that it will cost them money to pursue further payments. This may appear to be what has happened, but it could be that they are planning to return the debts. You may not hear from then again, but you could end up back where you started with calls and letters from your creditors.
   
   
2. The debt could revert back to the company that you originally owed the money to. It will then be up to them if they write it off or decide to make sure you pay it.
   
   
3. You could be made bankrupt. This will not be a good outcome for anyone, as the company will have to pay for this to happen, and cannot be sure that they will make much back. Although it will mean you no longer owe the amount of money that you did, there will be long term consequences of being declared bankrupt. It will be best for the creditor if you agree to pay something to them although once an IVA has failed another one cannot be entered in to for some months.

It may seem strange but many people say they have a feeling of relief when they are declared bankrupt as they no longer have to make the payments or deal with the constant stress from the creditors.