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.

  • How to settle an IVA early
  • What amount of cash will be required?
  • Can you borrow the money you need?
  • Using a Windfall to settle an IVA

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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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10 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.

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