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.
Included in this article:
- How to settle and IVA early
- What amount of cash is required?
- Where can the money you need come from?
- Can you use a windfall you have received?
Want help to start an IVA? Give us a call (0800 077 6180) or complete the form below to speak to one of our experts
How to settle an IVA early
Once a monthly payment IVA starts it usually lasts for 5-6 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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Hi James,
I have an IVA through Creditfix and a friend has offered to pay off the remaining aprox £10k. Creditfix have said they need proof (bank statement) that funds are available to make a full and final offer. My friend does not want to provide this as he has had fraud on his accounts. He has offered to pay into my account and for me to deal with it. Would this be possible?
Hi Stuart
All IPs (including Creditfix) have to ask for identity documents from any third party who wishes to provide funds to settle an IVA. This is to meet money laundering regulations. Normally the third party will have to prove their identity with a copy of their passport or driving license and the fact that the funds are coming from a reputable source (ie a statement from the bank where the funds are held). Such a statement also provides confirmation that the funds are available before making the offer to your creditors.
Generally speaking once the third party understands the reason that the documents have to be produced they are happy to provide them. If your friend will not produce these documents then in some cases it could prevent you from using their funds to settle your IVA.
Be very careful about your friend paying this money into your account. Before you decide to do this speak to Creditfix and get confirmation from them that they would be happy with this. In some situations your IP could then claim the payment is simply a windfall you have received and must be paid into the Arrangement on top of your monthly payments rather then settling it early.
Hello,
My father provided me a gift of £22k for my wedding this year. This is more than enough to pay my outstanding IVA but Creditfix is asking for copy of his passport.
I don’t want to provide this as my father wanted this money saved towards a home deposit rather than paying my IVA.
Why do they need this?
Hi Melanie
If you have told credit fix that a third party is offering funds to settle your IVA early they are under a legal obligation to do money laundering checks to confirm the funds are coming from a reputable source. These normally include asking for a copy of the individual’s photo id (driving license or passport) and confirmation that the funds are coming from a UK bank account (for example a copy of the individual’s bank statement).
If you are unable to provide these documents it may be that Creditfix are unable to proceed with the settlement proposal at all.
My iva was for 5200 I started it in Oct 2016 Paid £80 a month till this Feb 2019 then the payments went up to 218 as I got a better job I ask the iva people if I offered 1500 to pay it off could I they said no I had to give them the 1500 and continue paying 218 for the next 27 months is this right
Hi Monica
If you want to settle your IVA early you will normally have to offer an amount equivalent to the sum of your remaining payments. In other words if you are paying £218/mth and have 27 months left you will need to offer £5886 (27 x £218).
Given this would mean that overall you will repay much more than you owed I would suggest it might be better to consider letting your IVA fail. You could then repay the remaining debt outstanding yourself more quickly using a free Debt Management Plan set up by Step Change.