Can You Stop Your IVA and Go Bankrupt?

An IVA is designed to last five or six years, and a lot can change in that time. A job loss, illness, a separation or rising living costs can mean that payments that were affordable at the start no longer are. If that's happened to you, you may be wondering whether you can stop your IVA and go bankrupt instead, or move to a different solution altogether.

You can. But ending an IVA has real consequences, so it's worth understanding how the switch works, what it costs and the options that might let you keep your IVA going.

Why people switch from an IVA to bankruptcy

The most common reason is that the IVA has simply become unaffordable. That might be because of a big drop in income, extra essential costs, or a change in household circumstances. Bankruptcy can then be a quicker route to dealing with the debt. It usually ends after 12 months and doesn't rely on years of monthly payments, although you may still have to pay towards your debts for up to three years if you have spare income.

Others switch because they're near the start of a long IVA and their situation has changed so much that a different solution, such as a debt relief order, now fits better.

Try these before ending your IVA

Before deciding to stop your IVA, it's worth asking your insolvency practitioner whether any of these could help:

• A payment reduction. If your costs have risen or income has fallen, your payment can be reduced. Under the current IVA Protocol, your supervisor can agree some reductions without going back to creditors.
• A payment break. If the problem is temporary, a short payment holiday may give you breathing space. Missed months are usually added to the end of the IVA.
• A variation. For bigger changes, your practitioner can ask creditors to vote on changing the terms of your IVA.
• A full and final settlement. If you can raise a lump sum, for example with help from family, creditors may accept it to end the IVA early. See how to exit an IVA early.

Our guide to what to do if you can't pay your IVA covers these options in more detail.

How an IVA is ended

There are two main ways an IVA comes to an end before it's completed.

You ask your supervisor to end it

You can contact your IVA supervisor and ask them to terminate the arrangement. They'll then issue a certificate of termination, confirming the IVA has ended, and notify your creditors. This can still take some time, so it's worth asking for regular updates.

The IVA fails after missed payments

If you stop paying, your supervisor will usually send a breach notice and give you time to put things right. If the breach isn't fixed, they report back to creditors, who can decide to vary the IVA, end it, or petition for your bankruptcy. A failed IVA doesn't automatically mean bankruptcy, but a petition is possible. Read more in what happens if my IVA fails?

Whichever route applies, your supervisor must direct you to free, regulated debt advice when an IVA ends early, so you can plan your next step.

Applying for bankruptcy after your IVA

Once your IVA has ended, or is in the process of ending, you can apply for bankruptcy yourself online through GOV.UK. The fee in England and Wales is £680. An adjudicator reviews your application, and if it's accepted you're made bankrupt.

Bankruptcy works very differently from an IVA:

• It usually ends after 12 months, after which most remaining debts included are written off.
• If you have spare income, you may have to make payments for up to three years under an income payments arrangement.
• Your home and other valuable assets may be sold to repay creditors. This is one of the biggest differences for homeowners.
• It can affect certain jobs, and you can't act as a company director without court permission.
• It stays on your credit file for six years.

Our guides to bankruptcy explained and whether an IVA is better than bankruptcy set out the full picture.

Switching from an IVA to a DRO or a DMP

Bankruptcy isn't the only option after an IVA.

• Debt relief order: if your income has dropped a long way and you now have less than £75 a month spare, owe less than £50,000 and have few assets, a DRO may be possible. It's free and usually lasts 12 months. It can't be approved while the insolvency register still shows your IVA as current. Compare the two in our IVA vs DRO guide.
• Debt management plan: if you can afford to repay your debts in full over a longer period, a DMP is an informal alternative. Creditors don't have to freeze interest, and nothing is written off.

What happens to your debts when an IVA ends

When an IVA ends without being completed, the protection it gave you ends too. Creditors can contact you and chase what you still owe. Interest and charges can restart, and some creditors may add back interest that was frozen during the IVA. Payments you made into the IVA are taken into account, but they aren't refunded. That's why it's important to have your next solution lined up so you're not left exposed.

The key takeaway

You can stop an IVA and move to bankruptcy or another solution if your circumstances have changed. But ending an IVA means losing its protection, and bankruptcy brings its own risks, particularly for homeowners. Speak to your insolvency practitioner first about reducing or pausing payments. If switching is the right move, get free advice from StepChange, National Debtline or Citizens Advice so your next step is in place before the IVA ends.

Common questions

Can I cancel my IVA and go bankrupt?

Yes. You can ask your IVA supervisor to end the arrangement, and you can then apply for your own bankruptcy online. In some cases the supervisor or a creditor may petition for your bankruptcy after an IVA fails. It's worth talking to your insolvency practitioner first, as there may be ways to keep the IVA going.

How much does it cost to go bankrupt after an IVA?

Applying for bankruptcy online in England and Wales costs £680. Money you've already paid into your IVA is not refunded, although your creditors will take what they've received into account.

What happens to my debts if I stop my IVA?

Once the IVA ends, creditors can chase you again for what you still owe. Interest and charges that were frozen can restart, and some creditors may add back interest for the period of the IVA. That's why it's important to have your next step in place before the IVA ends.

Can I switch from an IVA to a debt management plan?

Yes, but a debt management plan is informal, so creditors don't have to freeze interest or stop chasing you, and there's no legal write-off of debt. Your IVA would need to end first. A DMP may suit you if you can afford to repay your debts in full over time.

Can I get a DRO after my IVA ends?

Possibly, if you now meet the DRO criteria, such as owing less than £50,000 and having less than £75 a month spare income. A DRO can't be approved while the insolvency register still shows your IVA as current, so evidence that it has ended may be needed.

How long does it take to end an IVA?

It varies. If you ask your supervisor to end it, a certificate of termination is issued, but this can still take some time. If an IVA ends because of missed payments, the process from the first missed payment to termination can take around seven months.

How IVA Advice Online can help

If you're not yet in an IVA, we can explain how one could change over time and what your options would be if things don't go to plan. To talk through your options, get in touch.