What Happens When an IVA Fails?

Can an IVA Fail?

Yes. If you breach the terms of your IVA sufficiently - and do not remedy the breach - your Supervisor may terminate the arrangement. This is called IVA termination or failure to complete.

Around 25-30% of IVAs do not complete as planned. Many failures occur not because of genuine unresolvable hardship, but because people stop engaging with their IP rather than raising problems early.

Common Reasons for IVA Failure

• Missing multiple monthly payments without contacting the IP
• Failing to respond to annual review requests
• Concealing a windfall or material change in circumstances
• Taking on new credit without the IP's consent or knowledge
• A permanent and severe drop in income making any payment impossible
• Material misrepresentation discovered in the original proposal

The Breach Notice Process

1. 1Your Supervisor issues a formal Notice of Breach detailing what you have done (or failed to do)
2. 2You are given an opportunity to remedy the breach - typically 14-28 days
3. 3If remedied (e.g. arrears cleared), the IVA continues on its existing terms
4. 4If not remedied, the Supervisor convenes a creditor meeting and proposes termination
5. 5Creditors vote on whether to terminate or grant a further opportunity to remedy
6. 6If termination is approved, a formal Notice of Termination is issued

Consequences of IVA Termination

• Original debts are reinstated - minus payments already made - and interest/charges may resume
• The IVA is recorded as failed/terminated on the Individual Insolvency Register
• A failed IVA on your credit file is more damaging than a completed one
• Creditors are free to resume collection activity against you
• Your Supervisor may petition for your bankruptcy if they believe assets exist for creditors

Could I Be Made Bankrupt?

Yes - your Supervisor or a creditor could petition for bankruptcy after IVA termination. Whether they do depends on whether there are assets to realise. If you have no significant assets and no income, creditors may simply write off the remaining debt rather than pursue expensive bankruptcy proceedings.

What Are My Options If My IVA Fails?

How to Prevent IVA Failure

• Contact your IP immediately if your income drops significantly or you lose your job
• Never miss a payment without speaking to your IP first
• Respond to all annual review requests promptly and accurately
• Declare any windfall money - however small - as soon as you receive it
• Read your IVA terms so you know exactly what is and is not permitted

This information is for general guidance only and does not constitute financial or legal advice. An IVA is a formal insolvency solution - fees apply and your credit rating will be affected. Seek independent professional advice before making any decisions.