What Happens After an IVA Fails?

Any debt solution is likely to be entered into with a commitment to success. Sometimes circumstances change and it may become unviable to meet the terms of your individual voluntary arrangement (IVA) In this case, what happens after an IVA fails? Does that change if your IVA failed in the first few years or if an IVA failed after 4 years?

What Are the Consequences of a Failed IVA?

Once your IVA fails, whether by you requesting your nominee to cancel the IVA or by you breaching the conditions of your IVA and not rectifying this, you will be issued a certificate of termination. What are the consequences of a failed IVA?

By nature of an IVA, creditors are no longer able to contact you, only one monthly payment is required which is disbursed by your insolvency practitioner to your creditors, interest is frozen, and court action can not be taken against you (unless your creditors are in the EU).  They are the benefits of an IVA, and they are no longer available to you once an IVA fails.

Further to this, you are still liable for any remaining debt plus any interest that may be backdated to the start of your IVA. If you don’t make alternate arrangements to repay your debts, your creditors may petition for you to be made bankrupt. Under certain conditions, your insolvency practitioner may also be required to petition for your bankruptcy.

IVA Failed After 4 Years

Depending on the point in the debt solution process that your IVA fails, there may be different impacts. For example, the monthly payments for the first 12 to 18 months of an IVA may only cover the administrative costs of the IVA (particularly if the monthly repayments are less than £150). That could mean that even after 18 months of repayments, the debt remaining should the IVA be cancelled could be similar to that at the start of the IVA.

If the IVA failed after 4 years the payments already made would likely have covered a much larger portion of the debt itself. It would be worthwhile pursuing the Breathing Space Scheme, after you no longer have an IVA so you can have protection from creditors while you explore other ways to achieve a fair and reasonable outcome for both you and your creditors.

Can I Get Another IVA if One Fails?

It’s possible to get another IVA if one fails, but bear in mind you will be beginning again with potentially a greater debt than you started your IVA with due to interest applied and a new lot of process fees. It may also be difficult to ensure the 75% approval required from the creditors for the IVA to go ahead if you have already failed to meet the IVA arrangements. Debt management plans or bankruptcy are other options that can be explored if an IVA fails. It may be prudent to work closely with experienced insolvency practitioners who can help ensure your IVA is a success and you become debt free under the agreed arrangement.

Irwin Insolvency has a team of professional insolvency experts who can help you understand the implications of IVA failure and options available to you. Contact Irwin Insolvency to better understand your debt solutions.