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Can you settle an IVA early?
Money Advice, Debt Advice & Debt Help

Can you settle an IVA early?

Can you settle an 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 the IVA. There is no one answer to this. The amount required is different in each case and will depend on your specific circumstances.

As a rule of thumb you will need to pay an amount equal to the total of your outstanding monthly payments. So for example if you are paying £200/mth and have 24 months to go you would need to offer £4800 (£200 x 24).

You circumstances may have changed meaning you are no longer in a position to maintain your IVA payments. In this situation your creditors may be prepared to accept a lower amount.

The amount required to settle your IVA must first be agreed with your IVA company. Most will consider a sum equivalent to your outstanding payments. However others may demand more.

Where can the money you need come from?

The cash required to settle your IVA early can come from a number of places. However it cannot be money that your creditors would normally be entitled to.

As such, the most common source is a gift or loan from a family member or friend. Money offered in this way is only available to your creditors to settle your Arrangement. In the absence of such an agreement they would not be able to get their hands on it.

If you are a home owner it may be possible to release equity from your property. If you can raise cash in this way your creditors will often be prepared to take this to settle the Arrangement immediately

Remortgaging to settle an IVA will require the assistance of a specialist broker. Call us (0800 077 6180) or complete the form below for help with this.

Can you use a Windfall to settle your 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.

That said some windfalls can be used to to settle an IVA early in specific circumstances. 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 to settle your Arrangement.

However this will only be the case if it is clear you will be unable to get a new job (perhaps due to ill health or your age). Where you can get back into employment it is very different. You will be allowed to keep some of your redundancy money to maintain your living expenses and IVA payments. The rest will have to be paid into the Arrangement.

It is not usually possible to settle an IVA early after receiving a windfall. This money usually has to be paid into your Arrangement on top of your normal monthly payments.

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    150 thoughts on “Can you settle an IVA early?

    1. Gemma says:

      Hi, I have an IVA of a couple of thousand left to pay off and my partner, who is not part of my IVA, has offered to pay off the remaining balance early. Is this even possible?

      1. Hi Gemma

        Yes it is absolutely possible. A third party such as your partner can offer to pay off your IVA early. As discussed in the article above, they will normally need to offer the same as you would otherwise have paid into your IVA. However you will need to speak to your IVA company to confirm this.

        Note: If you decide to go ahead, your partner will be asked to provide photo id and a bank statement confirming the funds are coming from a legitimate source. This is to comply with the UK money laundering regulations.

    2. Paul says:

      My wife has £6000 and i have 35000 aprox, only 3000 of wifes is in joint name if she has windfall does she only have to settle her own amount £6000

      1. Hi Paul

        From what you have said I assume you both have a IVAs which are interlocking? If this is the case and she receives a windfall then what happens will depend on how terms of the agreements are written. That said under normal circumstances, 100% of her windfall will have to be paid into her IVA. If this is sufficient to pay 100% of her total debt plus IVA fees and interest, then and only then would her IVA be settled early. If not then she will have to keep paying the monthly payments as normal.

    3. kyle says:

      Hi, my partner is willing to give me money to offer a full and final payment on my IVA. This money will only be available for an offer for my IVA or I won’t receive it. what will my partner need to provide? The money is coming from savings of there’s will I need to prove where and how this money came from?
      thanks in advance

      1. Hi Kyle

        Your IVA company will need to do standard money laundering checks before they can accept the funds from your partner.

        All IVA companies have slightly different requirements so you will need to check with them, but normally they will require proof of ID (copy of passport or photo driving license). In addition proof that the funds are coming from a UK bank account (copy of a bank statement – the 1st page summary is normally sufficient).

    4. Kealey T says:

      My mum is willing to pay my via off 4 yrs early, I just wonder if there is any benefit to this?
      As I understand the via will still be on record & my credit score won’t increase, I only ask as I would like to buy my first house in 2 years & not sure if this will be possible if it’s paid early.

      1. Hi Kealey

        The main advantages of settling an IVA early (other than of course no further monthly payments) are you no longer have to do annual reviews and any extra money you earn is yours to keep. In addition windfalls you receive such as inheritance after the Arrangement is settled are yours to keep.

        However it is important to understand that settling early will NOT improve your credit rating. The record of the IVA will remain on your credit file for the full 6 years regardless of whether you settle early or not.

        Generally speaking you will not be able to get a mortgage until the record has come off your file or the IVA has been settled for 3 years (which ever is the earlier). So settling early could help you in terms of buying a property because with no more monthly payments you might be able to save more for a deposit. However you will still have to wait at least 3 years before you are able to get a mortgage.

    5. Kate H says:

      Who does the interest my IVA want me to pay if I pay off the whole amount go to?

      1. Hi Kate

        If you have to pay interest, it is paid to your creditors.

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