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.
Unfortunately I lost my mother at Christmas. I along with my daughter will get some inheritance money.
Now I took an iva out last sep so still a long way to go. Do I have to inform the company right away about the money I’m inheriting? Until everything has been settled with probate I’m not sure the sum I will be receiving.
I would also want to pay it off as well but read somewhere they wont allow you to do so with inheritance money.
Hi Emma
Sorry to hear about your Mother.
You will have to tell your IVA company about the inheritance you receive. You might as well tell them straight away even if you don’t know exactly how much you will get. If you don’t tell them then the solicitor who is dealing with your Mother’s probate will tell them.
You can’t normally use inheritance to pay off an IVA. Inheritance is a windfall and so the money you receive will have to be paid into the arrangement in addition to the monthly payments you make.
The only time an IVA can be settled early with inheritance is if the amount you have received is sufficient to repay 100% of the debt you originally owed (lass the payments already made) + the IVA company’s fees + interest on the original debt at 8% pa from the start of the IVA.
My husband has recieved money from his father’s estate, of £41 500,. His iva was for £43250 less 2 years already paid. We have offered final settlement of £27500″, which will leave some money for new car, kitchen & windows, our iva company are putting the offer forward however we do understand that this may not be accepted and they will want all the money.
They have also said they may take the lot plus extra payments. I thought once it’s paid in full that was it not further payemts
Hi Julie
If the terms of your husband’s IVA are standard then the following would apply if he receives a windfall such as inheritance:
– 100% of the original debt must be paid (less any payments already made into the IVA) plus
– 100% of the IVA company’s fees and costs plus
– interest charged on the original debt at 8% per year from the start of the IVA
If after all of these have been paid, any funds were remaining, these would be returned to him. From what you have said the windfall received would cover the original debt. However despite the payments already made there would still be outstanding fees and interest and so payments would have to continue.
Given this I am very surprised your IVA company is willing to even make an offer to the creditors. Most would stick their heals in and say the money simply have to be handed over. That said if they are willing to put a settlement forward they must feel there is half a chance it would be accepted….
Hi I in my third year of iva I was paying 127 a month I’ve just been made redundant and I retire in October I’ve told them the situation and offered to pay a lump some about 1500 short of what I owe I’m waiting for them to get back to me thinking about it I really need that money to see me throu till I retire or should I made myself bankrupt
Hi Alan
Given you have offered a lump sum to settle your IVA I assume you received a redundancy payment? If you actually need this to see you through then you could withdraw your settlement offer. Then, if you are not a home owner, bankruptcy could well be a sensible next step to resolve your debts.
That said depending on how much redundancy money you have received, the funds might be at risk if you go bankrupt straight away. As such you could stop paying your IVA but delay going bankrupt until October. Your creditors are unlikely to start collections actions against you in these timescales.
If you are thinking about this then I suggest you get in touch with me here at Beat My Debt (0800 077 6180) and we can discuss whether it is a sensible idea and the implications based on your your personal circumstances.