Can you settle an IVA early?

Settle and IVA early A monthly payment IVA normally lasts 5-6 years. However it may be possible to settle the Arrangement early if a lump sum can be raised.

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How to settle an IVA early

Once a monthly payment IVA starts it usually continues for at least 5 years. It is however possible to reduce this period. The Arrangement can be settled early with a lump sum.

While the Arrangement is running you can offer to pay your creditors a one off cash payment. In return they then agree that no further monthly payments will be required.

Once the cash is handed over the Arrangement is completed. The outstanding debt is written off and you are no longer bound by its terms.

Settling your IVA early means you have no further annual reviews of your circumstances. In addition any subsequent increases in income or windfalls you receive are yours to keep.

How much cash is needed to settle an IVA early?

The key question is how much cash will be required to settle an IVA early. There is no one answer to this. The amount required is different in each case and will depend on your specific circumstances.

You may still be in a position maintain your monthly payments but you no longer want to be in the Arrangement. In this situation the amount you need to offer must be similar to the total payments still outstanding.

It might be possible to negotiate a slight discount in recognition of your early payment. However an amount that is too small is likely to be rejected in favour of simply collecting the monthly payments as originally agreed.

If your circumstances have changed and you are no longer in a position to maintain your agreed IVA payments the creditors may be prepared to accept a much lower sum.

Can you borrow money to settle your IVA?

The cash required to settle your IVA early can come from a number of places. The most common is a gift or loan from a family member or friend. Your creditors would not normally entitled to money from this source.

Given this the offer is made on the basis that it will only be available in return for the early settlement of your Arrangement and no further payments being required.

If you are a home owner it may be possible to release equity from your property. This is generally required in the 5th year of your agreement as standard. However if you can raise cash early in this way your creditors will often be prepared to take it to settle the Arrangement immediately

It is possible to remortgage your property during an IVA if the purpose is to settle the agreement early. However it is normally only available if you have at least 15% equity.

Using a Windfall to settle an IVA

If you receive a windfall during your IVA it will normally have to be paid into the Arrangement in full. The injection of the extra funds does not reduce length of the agreement and you have to continue making your payments.

However some windfalls can be used to to settle an IVA early. One example of this is a redundancy payment. If you lose your job you may be able to offer the redundancy money you have received in full settlement of your Arrangement.

If you are unlikely to get a new job your creditors will normally settle for just part of your redundancy money. You will be allowed to keep some to live on. However this will usually only be enough to cover 3 months living expenses.

If you are likely to get back into work quickly it may not be possible to use redundancy money to settle an IVA. Your creditors could demand the redundancy you have received as a windfall and also ongoing payments once you are back in work.

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28 thoughts on “Can you settle an IVA early?

  1. Gary says:

    I’m paying my iva off early due to me selling my house and moving. I have a lot of equity and I don’t mind paying it back but I am paying back more than I started at least 15000 pounds extra is this right?

    1. Hi Gary

      If you sell your house during an IVA the money you raise from the sale (or your share of this if the property is in joint names) is considered to be a windfall. In other words 100% of your share of the money raised will have to be handed over to your IVA company.

      In these circumstances the following amounts have to be paid: Firstly the total debt owed to your creditors on the day you started your IVA (less any payments you have already made into your Arrangement). Secondly any fees and costs incurred by your IVA company up until the date the windfall was received and associated with settling the IVA thereafter. Thirdly interest charged at 8% per year on the total debt you owed when you started the IVA for the number of years you were in your IVA.

      Given this you can see that the total you will have to pay back in these circumstances could easily be a number of thousands of pounds more than the total detbt you originally owed. For this reason it is always sensible to get independent advice before selling a property during an IVA.

  2. Tabs says:


    I am in an IVA but my Mum has offered to to give me a lump sum to pay this off. Will it remain on my credit file for the full 6 years?

    1. Hi Tabs

      This is a very important question to ask. The answer is yes. It does not matter whether you settle your IVA early. The record will still remain on your credit file for the full 6 years from the start date.

      This is very important to understand if you plan to apply for a mortgage after your IVA is finished. Even if you settle the Arrangement early you are still likely to have to wait for the full 6 years when the record comes off your credit file to get a mortgage.

  3. John says:

    I have been able to release pension money. I want to pay back IVA . Original debt was 12000 but IVA agreement was 6000. Will I pay back the higher amount or the agreed 6000?

    1. Hi John

      From what you have said I assume that you have already released these funds? If this is the case and you did not get prior agreement from your IVA company to use these to settle your IVA it will be a problem.

      The issue is if you release cash from your pension during your IVA without prior agreement from your IVA company it is treated as a windfall. As such you will have to hand the full amount over to your IVA company. You will then have to continue paying your ongoing IVA payments as normal. The IVA will not be settled early unless you have withdrawn sufficient to pay the total debt owed at the start of your IVA + IP fees and interest.

      Having said the above it is possible to settle an IVA with money from your pension. However you must agree the figure you will need to release with your IVA company before taking the money. They will put the offer to your creditors which will then either be accepted or rejected.

      If accepted you go ahead and release the agreed funds. If rejected you can either up the offer or withdraw it and keep the funds in your pension. You cannot be forced to withdraw more if you do not want to. You then simply continue to pay your IVA as normal.

  4. Sophie says:

    Hi. My husband is willing to lend me the money to pay off my iva. Is this okay?

    1. Hi Sophie

      The answer is yes. Your husband can certainly pay off your IVA on your behalf using his own money. As highlighted in the article above the amount required will generally have to be equal to the number of months left in your IVA x the monthly payment. In other words if you are paying £150/mth and have 24 months (2 years to go) the amount offered will have to be approximately £3600.

  5. Arthur says:


    Im trying to decide what is a reasonable offer to make to my IVA company if I want to sell my home to pay off the IVA. My IVA Company have told me tbey cant give me a settlement figure until AFTER i have sold the house…..

    1. Hi Arthur

      You need to be very very careful about selling your house during an IVA. If you do without a prior written agreement with your IVA company about how much of the equity they can take then all the equity released is considered to be a windfall and will be paid into your Arrangement in full. They are then allowed to deduct the following from the amount received:

      – Enough to pay 100% of the debt you owed when you started your IVA (less the payments you have already made.
      – Enough to pay their costs and fees in full
      – Enough to pay interest on the original amount of debt you owed at 8% per year from the start date of your IVA

      As such you could end up paying £1000s more than you owed when you started the IVA

      I am surprised that your IVA company has not explained that to you. It is a relatively simply calculation for them to make. For them to tell you that they cannot give you a figure until after your house is sold is very poor. It seems to me that they are avoiding telling you the reality.

      Having said the above it ought to be possible to settle your IVA early for a reasonable amount by selling your house. This is because legally you cannot be forced to sell. If the offer you make is not acceptable to your creditors it can be withdrawn and you simply continue paying your monthly payments as before.

      A reasonable offer would be your monthly payment multiplied by the number of months left on your agreement (given you are a home owner remember to add an extra 12 months in lieu of the equity in your property).

      Your IVA company is obliged to put any reasonable offer you make to your creditors. As such you should be able to go to them with this and ask them to make the offer. However remember DO NOT sell your property until any such offer is agreed and you have the agreement in writing.

  6. Lizzie says:


    I am in a I.V.A already and I am struggling to afford the monthly repayments because of a 2nd baby. I pay £150/mth and I have 44 months left to pay on it. My mother in law has offered to settle my remaining balance in one large sum. Can this work and how do we go about it and how long does it take to do this and how much should she offer?

    1. Hi Lizzie

      A third party like your Mother in Law can certainly settle your IVA on your behalf by paying a lump sum. On the face of it the amount she will need to pay must be the equivalent of the normal monthly payment multiplied by the remaining months. As such in your case she would need to pay £150 x 44 = £6600. As highlighted in the article above you may be able to negotiate a slightly lower amount given your circumstances have changed and you will struggle to maintain the ongoing payments.

      Your IVA company will implement this for you so you will need to discuss it with them. They first have to put the offer in writing to your creditors. This is called a variation. If the majority accept the variation it is legally binding on them all. Your IVA company would then let you know and your Mother in Law can make the payment.

      The process normally takes 3 months and you will need to keep up with your monthly payment in the meantime. However you may be able to negotiate that anything you pay while you are waiting can be deducted from the lump sum which eventually has to be handed over.

  7. Rhiannon says:

    Hi, I am leaving my current job and as a leaving gift my boss would like to loan me the money to clear my IVA. It is currently at the amount of £13,338. What would you think is a realistic amount to offer the creditors?. They have requested for a bank statement from my boss which i know when they see it they will realise he is more than able to pay the full amount. Do you feel due to this they will ask for the full amount?

    Also we are going to agree to a monthly amount for me to pay him back, is it going to be a problem that this is a loan and not just a gifted amount of money?

    The reason for paying the IVA off is that i am moving house and will be earning a higher income and i would like to clear the IVA so i can save the extra income i will be getting and this will allow me to start saving some money each month to put towards buying a home once the IVA is off my record. Do you feel that they would accept this as a reasonable explanation for clearing the IVA early? Many thanks

    1. Hi Rhiannon

      Firstly the amount your boss will have to pay to settle your IVA early will have to be equivalent to the monthly payment you make x the remaining months you have to pay. As such if this is currently £13,338 this this is what he will have to offer. The creditors are only ever likely to accept less than this if your circumstances have taken a turn for the worse and you can no longer pay your IVA. Remember if you are a home owner you may have to add an addition 12 months if there is equity in the property.

      The reason your IVA company has asked for a bank statement from your boss is simply to adhere to FCA money laundering rules. They must be aware of where the money is coming from and that it is a legitimate source. The fact that your boss could be a millionaire is irrelevant. The amount he will have to pay is based on the calculation above and not how wealthy he may or may not be.

      In terms of paying your boss back I suggest that you do not discuss this to your IVA company. There is no need for them to be made aware of this or be involved. Most people who settle an IVA early with money from a friend or family member agree to pay it back. However this is nothing to do with the IVA company.

      I recommend that you do not mention to your IVA company that your income is likely to increase or that you want to be in a position to save more. This would NOT be seen as acceptable by your creditors. Why would they settle early in the knowledge that you re about to earn more and could then be in a position to pay them more…? Your explanation should simply be that your boss has offered to help settle the Arrangement early and this is good as you cannot be certain whether you will be able to sustain your income and thus IVA in the future. There is never any certainty of that and so it is true.

  8. Steve says:

    Can i settle an iva early with money i’ve saved by myself?

    1. Hi Steve

      This is a good question. The answer in theory is yes as long as the money you have saved is from legitimate amounts you have been able to put by out of your agreed living expenses budget. The issue in normal circumstances is that the amount you are able to save in this way would not be sufficient to make an acceptable settlement offer. The above article discusses how much this would have to be.

      If you have been able to save more because you have worked overtime or received bonuses during your IVA it is also possible to use these funds to settle your IVA. However this is only the case if you have previously let your IVA company know about these extra earnings and any required amount has already been paid into the Arrangement.

  9. Craig says:

    I have been paying my IVA for the past 3 years. I have received some inheritance money and would like to make a final settlement payment. I am worried they will take money I want to put aside for my kids.

    1. Hello Craig

      If you receive inheritance during an IVA you will have to discuss this with your IVA company. This money is a windfall. As such you will be obliged to hand the full amount over to them. They can then deduct 100% of the debt owed. They can also take their fees charged to date and interest on the original debt at 8% pa from the start date of the IVA.

      Only after all these things have been deducted would any remaining money be returned to you.

  10. Sheran says:

    I have been in an iva for 3 years I have 22 months left at 160 per month. I am currently on sick from work and lucky enough to receive full pay for 3 months but after this it will be reduced so I’m a bit worried about keeping up payments. I don’t want them to reduce it as this would just lengthen the agreement.

    My partner has offered to gift me the remaining amount payable in a lump sum. I understand he has to prove he is able to do this but how long does it take and are you guaranteed they will accept it

    1. Hi Sheran

      If you are on long term sick and are no longer in a position to pay your IVA then it is certainly possible for your partner to offer a lump sum to settle the Arrangement early. As a rule of thumb he will need to offer the same amount (or a little less) than you would otherwise pay if you continued to pay your IVA. So in your case this would be £160 x 22 = £3520.

      You will need to speak to your IVA company about the situation and explain you want to settle early with funds from your partner. If he were to offer £3500 they would definitely go for it. Given you cannot continue to pay as you no longer have an income you might be able to get away with offering slightly less, say £3000.

      Once your IVA company has agreed on the amount then will then make the offer to your creditors on your behalf. This will be in the form of a variation to your IVA. It will normally take around 4-6 weeks to arrange this.


    Hi my iva is for 4 years and ive being paying them for 2 and half years. I’ve got 17 months left. My monthly payment is £96 so i called them up and told them that i want to pay of the remaining amount in a lump sums. They told me to send my bank statement to them and they will look into it.

    Then they told me that coz ive had pay rise i can pay £285 now. After i told them that i cant afford they say its now £150 which i still cant afford. How can i reduce again.

    1. Hi Lepani

      Under the terms of your IVA if your income goes up or your living expenses fall then your payments are also likely to go up. Basically your IVA company has to recalculate your surplus income and you have to pay 50% of the extra surplus into the Arrangement.

      The only way to reduce your payments is to review your income and expenses and prove that they have got the figures wrong and your surplus is actually lower than was calculated. However if the figures are correct the only way to lower your payments would be to reduce your income.

      Ultimately if you cannot reduce your payments then over the next 17 months you will pay £2550 (17 x £50). If you want to settle early a third party would need to offer approximately that amount. Having said that if you offer £2000 your IVA company might go for it.

  12. Don says:

    What is considered a windfall? Is there a threshold? What if I was given a £500 cash gift?

    1. Hi Don

      For the purposes of an IVA a windfall is basically any cash amount you receive during the Arrangement. Common examples are an inheritance payment, compensation payment or lottery win.

      Having said that one off income payments such as overtime or an annual bonus would not normally be considered a windfall. These types of payment are treated differently.

      In terms of the amount received most IVA Companies will let you keep a windfall if it is less than £500. However anything above this will normally be claimed and will have to be paid into your Arrangement in full.

  13. Jenny H says:

    Hi I have 18 months of an Iva left to pay at £400 per month which I am struggling to pay. I have had a heart attack recently and can not cope with working full time. Would I be able to get my payments reduced or my daughter has offered to take a loan to pay it off in a lump due to my Ill health. How much would they expect in a lump sum please advise.

    1. Hi Jenny

      It is definitely possible for your daughter to offer a lump sum to pay off your debt early. On the face of it the amount she would have to pay would be equal to the sum of the payments outstanding. In other words £7200 (18 x £400).

      However if you can no longer pay your IVA due to ill health it might be possible to negotiate a smaller amount. For example you might be able to offer £3000 (I am not sure anything lower than this would be accepted).

      The best thing to do would be to speak to your IVA company. Explain you can no longer pay your IVA due to ill health and suggest your daughter is able to offer a lump sum of £3000 to settle it. Then see what they say.

  14. Susan Roach says:

    I have an IVA over 5 years, which I started in July 2017, at £426 a month. My husband has come into some money and wants to pay this off for me. Would this be allowed? If so, how do I work out how much roughly it would be? Do I just ask them for a final quote?

    1. Hi Susan

      As highlighted in the article above it is absolutely possible to settle your IVA early if a third party (such as your husband) is willing to pay a lump sum on your behalf.

      As a rule of thumb the amount he will need to offer is the equivalent of the total of your remaining payments. So if you have paid 18 months and have a further 42 to pay he will need to offer £17,892 (42 x £426/mth).

      Generally speaking you should be able to get a small discount as the creditors are benefiting form the early payment. As such offering £16,000 might do the trick.

      You need to make the offer through your IVA company. As such speak to them and explain your husband wants to offer a lump sum to settle early. Suggest the amount of £16k and see what they say.

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