What happens if my IVA fails
IVAorg Clients
If you experience a change of circumstances and, as a result, can no longer afford your IVA payments then it is likely your IVA will fail.
If your IVA fails then you will be sent a 'Letter of Termination' and a 'Failure Report'.
The Failure Report will include:
- A breakdown of your payments paid into the IVA.
- The fees the Insolvency Practitioner (IP) has charged for their services.
- The names of all the creditors and how much was originally owed to each.
- The amount each creditor received as a dividend from the IVA payments.
- A list of the remaining outstanding balances owed to each creditor.
From this point you are no longer under the legal protection of your IVA and you are responsible once again for your debts.
As part of their duties, your IP will then distribute any remaining IVA funds to your creditors.
Our Pledge
IVAorg CIC are committed to trying to improve the outcomes for all our clients and, in particular, those vulnerable individuals whose IVAs fail through no fault of their own.
To those clients we offer our unique ‘pledge’.
“Should your IVA fail to complete successfully through no fault of your own, we will ensure the fees you’ve paid for our service will be used to reduce your debt to the maximum effect, guaranteeing to leave you no worse off.”
Our pledge protects our most vulnerable clients from having to pay any IVA fees.
What happens next?
In the majority of circumstances your IP will then notify your creditors that your IVA has failed and take no further action, but in some cases there may be a clause within the agreement that instructs your IP to petition for your bankruptcy.
If you have no such clause, then you have these options:
- Propose another IVA.
- Petition for Bankruptcy.
- Enter into a Debt Management Plan.
- Apply for a Debt Relief Order.
It is well worth taking time to consider your options, rather than making a rushed decision, as it can take several weeks for creditors to react to the news your IVA has failed.
If you would like to discuss our pledge with us in more detail then please call our helpline on 0800 856 8569
Other IVA Providers
If your IVA fails whilst being administered by another IVA provider then things are very different.
They will still send a 'Letter of Termination' and a 'Failure Report' to you.
A typical Failure Report will normally include:
- A breakdown of the payments paid into the IVA.
- The fees the IP has charged for their services.
- The names of all the creditors and how much was originally owed to each.
- The amount each creditor received as a dividend from the IVA payments.
- A list of the remaining outstanding balances owed to each creditor.
From this point on you are no longer under the legal protection of your IVA and you are once again liable for the outstanding balances left unpaid by the IVA.
Your IP will distribute any remaining IVA funds, giving priority their own fees. This has the effect of significantly reducing the amount being paid back to your creditors.
If your IVA fails within its first 12 -18 months, it is possible that your outstanding balances could be as high as when your IVA first started, with all your IVA payments being used to cover the IP’s fees and costs.
In the majority of circumstances the IP will notify your creditors that your IVA has failed and take no further action but in some cases there may be a clause within the agreement that instructs your IP to petition for your bankruptcy.
If you have no such clause, then you have these options:
- Propose another IVA.
- Petition for Bankruptcy.
- Enter into a Debt Management Plan.
- Apply for a Debt Relief Order.
For many people the failure of their IVA will be beyond their control but, wherever possible, every effort should be made to avoid failing an IVA.
If your IVA is failing, it is worth pointing out there are ways in which your IP might be able to assist you before it's too late.
If your IVA is protocol compliant, then your IP has, at their sole discretion, the capability to reduce your IVA payments or even offer a temporary 'payment break'.
So, it is crucial to keep good lines of communication open with your IP as this will give your IVA the best chance of a successful outcome.
If your IVA has recently failed and you would like to discuss your options with one of our team, just call our IVA helpline on 0800 856 8569
