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?
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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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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?
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).
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??
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.
Hiya,
I will be receiving redundancy money soon and my IVA company suggested paying £4,500 of £4,653 of it to them to settle my arrangement early. I pay £100 per month and have 3 years and two months left = £3,800. If the IVA company should allow 3 months for living expenses can I offer then lower than £3,800 & can they actually ask for that much of it?
Hi Gemma
If you are made redundant during an IVA the redundancy money you receive is treated as a windfall. Normally if you get a windfall it has to be paid into the arrangement in full. You then continue making your monthly payment as normal. As a result you simply end up paying more back to your creditors and writing less of your debt off.
The IVA would only be settled early if the windfall was large enough to repay 100% of your original debt (less payments already made) + your IVA company fees and costs + interest at 8% pa from the date the IVA stated.
The rules on what should happen to a redundancy payment are slightly different in so much as you are allowed to hold back the equivalent of 6 months net income. You continue paying your IVA with this money while you look for a new job. Anything over and above has to be paid into the arrangement.
Given this you have 2 choices. Keep the 6 months money and continue paying your IVA as normal which might result in your paying more overall. Or, pay the £4500 to settle the Arrangement now. However I think it would be highly unlikely that your IVA company will budge from the £4500 figure they require.