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 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. If you can raise cash in this way your creditors will often be prepared to take it to settle the Arrangement immediately

It is possible to remortgage your property to pay off an IVA 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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124 thoughts on “Can you settle an IVA early?

  1. Shannon says:


    So my partner is in a IVA and has another 2 and half years to go. His parents have proposed a sum of £10,000 to pay off the debt. If this wasn’t offered to us and his monthly payments stay he same the IVA would get about £13,000.

    We are so desperate for him to get out of the IVA so we can start saving some proper money as I’m doing all the saving atm. And even though an IVA is good it can be so tough and limiting.

    The meeting with his creditors are in a few weeks. Obviously there no no guarantee but what do you think the likely hood of them excepting the offer will be? Given your knowledge and experience.

    Thank you

    1. Hi Shannon

      If your partner’s IVA company has agreed to put the settlement offer of £10k to his creditors then I would be pretty confident it will be accepted. The IP will only put their name to the offer if they are pretty sure of success. Please do let me know how you get on.

  2. Shannon Sheppard says:

    Hi James it shannon. So good news they accepted the the figure we offered. They also brought the figure down as he made last months payment. We are over the moon. Just another question. Will the IVA still be on his credit file for the 6 years still or does it change now the agreement is less?

    1. That is brilliant news Shannon. I am very pleased to hear it.

      Even though his IVA has been settled early the record will still remain on your partner’s credit file for the full 6 years from the start date. It will then come off automatically. Unfortunately there is nothing that can be done to speed this up.

      If you are thinking about getting a mortgage in the future this will be possible. However you will have to wait until the record has come off his file or it is 3 years from the date of completion which ever is the sooner. But at least this give you time to save for a deposit.

      If you are looking to get a mortgage in the future please let me know and I can assist.

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