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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106 thoughts on “Can you settle an IVA early?

  1. Lewis says:

    If I acquire money during my iva can I pay it off early?

    1. Hi Lewis

      If you acquire money during your IVA it is a windfall. You must tell your IVA company and you will have to pay the money into the arrangement. Normally the money cannot be used to pay off the Arrangement early. This only happens if the amount you have received is relatively large.

  2. Christine Smith says:

    My husband has been trying to get iva company to contact him with nothing!? He e mailed and rang and left messages. He wants to know how much he owes. One year ago they were going to compile debts and let him know. Still paying but no response. What can he do?

    1. Hi Christine

      This does seem to be very poor service from your husband’s IVA company. All I can suggest here is he needs to keep contacting them.

      That said given he is interested in settling his Arrangement early the amount of debt outstanding is not normally relevant. He does not need to know this. He should make an offer based on the number of payments he has left multiplied by the amount he is paying each month. As such if he pays £200/mth and has 48 months remaining he should offer £9600 (£200 x 48).

  3. Hayley says:

    Hi. I am currently in an iva, my dad has agreed to pay the full amount. However the company i have gone through wont do anything until i provide proof of ppi recieved back in 2015 (iva taken out 2016).

    I have already provided a date for them of when this ppi was paid. This was also taken into consideration when the agreement was set up. It seems they just want to keep throwing more costs at me.

    What options do i have because i am being told i cant pay the full and final without proof of receiving the ppi??

    1. Hi Hayley

      I think your IVA company must need proof on file that the PPI you received was paid to you before your IVA started and not after. If you received the compensation after the start date then it would have been a windfall and should have been paid into the Arrangement. I assume they simply need to confirm this was not the case. It sounds as though you are going to have to provide proof of the date to break the deadlock.

      If you no longer have a record from the PPI company you used then I would have thought a bank statement showing the date the compensation was received would be proof enough (although you might want to confirm this with your IVA company) . If you don’t have statements going that far back you should speak to your bank. They will be able to send you one although they might make a small charge.

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