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, My name is Mario. I am in 16 months in my 72 month IVA. My very good friend has offered to pay the remainder in full, just over £5000. However, he doesn’t want to produce previous bank statements and give knowledge of his income, which I respect.
Will the IVA company want to know where and how he has made his money. He is totally legit, but also a private person.
Hi Mario
Your friend does not have to give knowledge of his income. However your IVA company have to comply with money laundering regulations. As such they must establish your friend’s identity and that the funds are coming from a legitimate source. He will therefore have to provide a copy of his passport (or driving license) and normally a copy of a bank statement from a UK bank where the funds will be paid from. Given he is happy to do that there will not be a problem.
Hi, I have an IVA of a couple of thousand left to pay off and my partner, who is not part of my IVA, has offered to pay off the remaining balance early. Is this even possible?
Hi Gemma
Yes it is absolutely possible. A third party such as your partner can offer to pay off your IVA early. As discussed in the article above, they will normally need to offer the same as you would otherwise have paid into your IVA. However you will need to speak to your IVA company to confirm this.
Note: If you decide to go ahead, your partner will be asked to provide photo id and a bank statement confirming the funds are coming from a legitimate source. This is to comply with the UK money laundering regulations.
My wife has £6000 and i have 35000 aprox, only 3000 of wifes is in joint name if she has windfall does she only have to settle her own amount £6000
Hi Paul
From what you have said I assume you both have a IVAs which are interlocking? If this is the case and she receives a windfall then what happens will depend on how terms of the agreements are written. That said under normal circumstances, 100% of her windfall will have to be paid into her IVA. If this is sufficient to pay 100% of her total debt plus IVA fees and interest, then and only then would her IVA be settled early. If not then she will have to keep paying the monthly payments as normal.