The potential consequences of a failed IVA

• Bankruptcy – The most obvious route for your creditors is to petition for your bankruptcy. Since you’ve broken the legally binding agreement you had with them, they may decide to take the matter to the courts. Bankruptcy can have a devastating effect and is something that many people taking out IVAs are desperate to avoid. If you’re made bankrupt then you could lose your home and your job.
• Debt management plan – Depending on your circumstances and the outstanding amount you owe, it may be possible to get the agreement of your creditors for a debt management plan. Given that you’ve already defaulted on your IVA, it could be difficult to persuade your creditors that you’re committed to the new plan.
• Mental health issues – IVAs fail for all manner of reasons but the end result is the same; you’re back to square one and looking for a way out of your debt problems. The failure of your IVA could leave you feeling like there’s nowhere to turn and compound the stress and anxiety that you’ve already been experiencing.
• Your credit rating – If your IVA has failed and you still owe money to your creditors then this will be reflected in your credit rating.
• Change of circumstances – If you know you’re going to miss some of your monthly IVA repayments then it’s crucial that you let your Insolvency Practitioner know in advance as they may be able to agree a reduction or a temporary respite depending on your reasons.