If your IVA fails, the legal protection it gave you comes to an end. Your creditors are free to chase the debts again — often with interest and charges added back on — and in some cases they can apply to make you bankrupt. It is a serious outcome, but it is not usually sudden, and there are often steps you can take before things reach that point.
An IVA does not fail simply because you have one difficult month. It fails when the arrangement can no longer be kept to and cannot be rescued through the built-in flexibility that most IVAs contain.
The short answer
- A failed IVA means you lose its protection and creditors can pursue the original debt again, including interest and charges.
- Your insolvency practitioner (IP) may issue a certificate of failure once the arrangement breaks down.
- Bankruptcy is a possible next step, but it is not automatic and is not always what happens.
- Missing one payment does not fail your IVA — talk to your IP early and problems can often be sorted out.
Why do IVAs fail?
The most common reason is missed payments. If you fall behind and cannot catch up, and no alternative can be agreed, the arrangement may be brought to an end. Other reasons include not keeping to the terms — for example, taking on new borrowing without permission or not declaring a change in your finances.
- Falling into arrears with your monthly payments
- A drop in income you cannot recover from
- Failing to declare a windfall, as covered in our guide to windfalls and inheritance
- Not co-operating with the annual review process
What happens step by step
1. A warning first
Your IP will not usually end an IVA without warning. If you miss payments, they will normally contact you to find out what is wrong and whether the arrangement can be saved.
2. A chance to put things right
Most IVAs have flexibility built in. If you are struggling, read what happens if you can't pay your IVA — options such as a payment break, reduced payments or a formal variation can often keep the arrangement alive.
3. A certificate of failure
If nothing can be agreed, your IP issues a certificate of failure. This formally ends the IVA, and the protection it provided stops.
What happens to your debts?
When an IVA fails, the debts do not disappear. Any payments you made will usually have reduced the balances, but whatever remains becomes payable again — and creditors may add back interest that had been frozen. In practice this means you could owe more than you expected after months of paying in.
Where your money went also matters. Your IP is entitled to take their fees from the funds paid into the arrangement, so it is possible that little reached your creditors before the failure. Your IP must account for this, and you are entitled to ask for a breakdown.
Could I be made bankrupt?
Bankruptcy is one possible consequence, but it is not guaranteed. Some IVA terms allow the IP to petition for your bankruptcy if the arrangement fails; in other cases, a creditor might apply. Equally, neither may happen, and you may simply be back to dealing with the debts directly.
If bankruptcy does become likely, it is worth understanding it properly rather than fearing it. Our guide to bankruptcy explained sets out how the process works, and is an IVA better than bankruptcy compares the two.
Your options after a failed IVA
- A new arrangement — depending on your circumstances, a fresh IVA or a debt management plan might be possible.
- Bankruptcy or a DRO — if your situation has changed, another insolvency solution such as a Debt Relief Order may fit better.
- Negotiating directly — in some cases you can come to your own arrangement with creditors.
Free, independent help is always available. MoneyHelper offers guidance on all of these routes at no cost.
How to avoid a failed IVA
The single most important thing is to talk to your IP the moment you sense trouble. Payment problems are far easier to solve early. Keeping up with your annual review and being honest about your finances also keeps the arrangement on track.
How IVA Advice Online can help
If your IVA has failed, or you are worried it might, you do not have to work out the next step alone. Our advice is free and confidential, and we can talk you through what a failure would mean and which route might suit you best. Get in touch whenever you are ready.