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.
Arrange a call with an IVA Expert
Privacy Policy
Your information will be held in strictest confidence and used to contact you by our internal team only. We will never share your details with any third party without your permission.
Hi! Is there a chance to pay early my IVA with sum offered by third party (in this case my brother), whos offering me money to pay this conplately in one go, but the money will come from account outside UK? He lives in England but has saving account back home in Poland with money he wants to use.
Hi Kristof
As far as I am aware there is no rule stating the cash lump sum to settle an IVA must come from a UK bank account. The only thing your IVA company need to ensure is that they carry out sufficient money laundering checks to be satisfied the funds come from a legitimate source.
Ultimately you will need to confirm with your IVA company as they are the ones who must agree. However I would have thought confirmation of the authenticity of the bank account (such as a bank statement) and proof of your brother’s identity (ie copy of his passport) should be sufficient to satisfy the money laundering rules particularly given the bank is within the EU.
Hi
I entered my IVA in January 2017 for a 5 year period. The total debt was £21,103 and based on my then salary and outgoings, the payments were to be £225 per month with an expected total recovery of £13,500. My circumstances have changed for the better, with several bonuses and pay rises meaning that the total amount going into the IVA is now significantly higher.
I wanted to find out if there is any room for negotiating some sort of early way out; not a full and final settlement as I don’t have the capacity to save a lump sum but basically some sort of slight reduction on the absolute total of £21,103. Obviously I appreciate the debts are my own however most people enter an IVA under the assumption that they take the various down-sides (negative credit rating, no access to consumer credit, difficulty re-mortgaging etc) in return for the up-side of a haircut on their total debt.
I would appreciate your advice on this situation
Hi Lee
Unfortunately the only way to settle an IVA is early is offer a lump sum payment from a third party (as described in the above article). Other than continuing to make ongoing monthly payments there is no other option I am afraid.
The way an IVA works is often not made 100% clear to people at the beginning. It is not a mechanism for writing off debt. It should be seen as a way of paying as much back to your creditors as you can over a fixed period (normally 5-6 years) with any balance remaining at the end being written off.
By this definition if your income improves during the plan your payments will increase. In some relatively rare cases this will mean that you are able to repay 100% of the debt you originally owed during the life of the IVA. There is no option for reducing that original balance I am afraid.
Could you please advice me on the following….
I have a iva with creditfix and i have contacted them on a settlement figure. They told me £6.5k if i am given/gifted the amount to pay it BUT if i borrow the money by remortgage they say i have to pay £11.2k. They say i have to pay the full back plus their fee if i get the oney myself. Why 5k more if I borrow the money?
Hi Joel
There is no logical reason why you should pay £11.2k if you borrow the money from your property rather than it coming from a third party. Have you checked the terms and conditions of your IVA? If there is nothing there to suggest this is what would happen in your case then you will have to ask Creditfix. I would actually be very interested to know what they say. It seems to me that they make up their own rules in these circumstances I am afraid.