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Why IVAs Fail

If you are simply quite fed up with the amount of debt you are dealing with on a daily basis and decide to do something about it, you may consider an IVA or bankruptcy. Ultimately it comes down to your creditors to decide which direction you have to take, and if you are able to go with an IVA you have the option of being able to pay off your creditors without it hurting your credit record like a bankruptcy can.

  • However, IVAs can fail before they even get off the ground. If you submit an offer to your creditors that they reject, you have to go back and re-submit your IVA proposal with some amendments. Usually these amendments benefit your creditors and not you, and sometimes you wind up agreeing to repayment terms that you really cannot manage. When your IVA fails right from the start, you can always see if you can get into a debt management plan or even go ahead and file for bankruptcy as a last resort.
What are the other reasons behind an IVA failing? You could default on your regular payments towards the IVA, you did not provide all of the needed information, or you failed to comply with the general terms that were outlined during you IVA hearing. There are stiff consequences attached to all of these reasons, so if you decide to engage in an IVA to help solve your debt you need to make sure you follow all of the restrictions and terms that were laid out for you.

IVAs can fail at any time during the five year term you are under. If for some reason you find it difficult to make your regular IVA payments, you need to speak to your IVA supervisor as soon as possible. They will reassess your financial situation and if applicable, work out a new arrangement that you can afford. Your creditors will be called to a second creditor’s meeting if they agree to it and your IVA could continue. Some creditors may insist that you be declared bankrupt when your IVA fails. It is up to you to convince your creditors to give you a second chance but if they refuse, you may have to file for bankruptcy or enter into a debt management plan.

Failing to make your regular IVA payments will put you in breach of contract with your creditors and you will probably receive a Notice of Breach from your IVA Supervisor. The notice gives you one month to rectify the default before they send you a Certificate of Termination that ends your IVA. Your IVA supervisor is then obligated by law in the United Kingdom to commence bankruptcy proceedings against you, and since you will no longer be protected by your IVA, your creditors can demand that you pay off the debt in full and start with the harassing phone calls once again. Once you start into bankruptcy proceedings due to a failed IVA it will be difficult to stop.
| IVA Basics | Trust Deeds | IVA and Utility Bills | IVA Case Study | Default on IVA | IVA default notice | Statutory demand - what to do | Stop creditor making you bankrupt | IVA Failure |