What happens if my IVA fails?
November 20, 2017
An IVA can fail for a number of reasons, and if you’re unable to make the required repayments you should inform your insolvency practitioner (IP) straight away. Reasons for failure can include not disclosing all of your assets at the initial financial assessment, failing to declare a monetary windfall, breaching IVA regulations by borrowing more than £500, or not cooperating with the IVA supervisor.
You’ll receive a notice of breach detailing the circumstances, the actions you can take to remedy the situation, and the timescale you have to take these steps. If you don’t take any action, or run out of time, the IVA will be deemed to have failed completely.
Creditors free to take legal action
As an IVA is legally-binding, your creditors are free to take legal action against you if it fails. This means they could force you into bankruptcy, although it may not be in their best interests to do so as it’s unlikely they would receive a high return from the process, if any at all.
It’s likely that your creditors will resume their debt collection processes as they did prior to the IVA, and they may still be open to other solutions. You should contact your creditors straight away, and attempt to negotiate a new repayment plan with each one individually.
There may be other debt solutions available to you, such as a debt management plan (DMP), which although an informal arrangement, could be of great benefit if your debts are relatively small.
What happens in practice when an IVA fails?
- The insolvency practitioner sends you a report detailing how much has been paid to your creditors, and a certificate of termination
- You have to pay the total remaining debt, and creditors are free to apply interest and other charges
- Three months after the IVA termination, your details are removed from the register of insolvencies
- The IVA stays on your credit file for six years from the commencement date, along with a note to say that it has failed
Other potential debt relief options
Debt Management Plan
As we mentioned earlier, a debt management plan is a potential alternative if your IVA has failed. It’s not legally-binding, but enables you to make an affordable monthly payment towards your debt in a similar way to an IVA. You must have surplus income after all your essential household bills have been covered.
Bankruptcy is usually seen as a measure of last resort, but can present an opportunity for people in unmanageable debt to start afresh financially, and relieves the considerable stress of dealing with creditors.
If you’re struggling to repay an IVA or want to find out more about escaping debt, our licensed insolvency practitioners will provide reliable and detailed guidance. Northern Ireland Debt Solutions helps people who live in Northern Ireland to deal with unmanageable debt, and ensures the most suitable solution is chosen in every case. Call one of our expert team to arrange a free, same-day consultation.
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