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 I have 18 months of an Iva left to pay at £400 per month which I am struggling to pay. I have had a heart attack recently and can not cope with working full time. Would I be able to get my payments reduced or my daughter has offered to take a loan to pay it off in a lump due to my Ill health. How much would they expect in a lump sum please advise.
Hi Jenny
It is definitely possible for your daughter to offer a lump sum to pay off your debt early. On the face of it the amount she would have to pay would be equal to the sum of the payments outstanding. In other words £7200 (18 x £400).
However if you can no longer pay your IVA due to ill health it might be possible to negotiate a smaller amount. For example you might be able to offer £3000 (I am not sure anything lower than this would be accepted).
The best thing to do would be to speak to your IVA company. Explain you can no longer pay your IVA due to ill health and suggest your daughter is able to offer a lump sum of £3000 to settle it. Then see what they say.
I have an IVA over 5 years, which I started in July 2017, at £426 a month. My husband has come into some money and wants to pay this off for me. Would this be allowed? If so, how do I work out how much roughly it would be? Do I just ask them for a final quote?
Hi Susan
As highlighted in the article above it is absolutely possible to settle your IVA early if a third party (such as your husband) is willing to pay a lump sum on your behalf.
As a rule of thumb the amount he will need to offer is the equivalent of the total of your remaining payments. So if you have paid 18 months and have a further 42 to pay he will need to offer £17,892 (42 x £426/mth).
Generally speaking you should be able to get a small discount as the creditors are benefiting form the early payment. As such offering £16,000 might do the trick.
You need to make the offer through your IVA company. As such speak to them and explain your husband wants to offer a lump sum to settle early. Suggest the amount of £16k and see what they say.
Hi
My iva is coming to an end on the sept 2019 and my property has been taken out because it was under negative equity.
My son is looking to give me some money to pay off my iva early. Would I need to go through the I&E all over again and send them my payslips or bank statrments.
Can you please advise me what process is involved to pay off the iva early and would i need to send them documents.
Thanks
Sue
Hi Sue
If you want to settle your IVA early you will need to go to your IVA company with a settlement offer. Normally the offer will have to be equal to the sum of your remaining IVA payments. So if you have 8 left to pay and you were for example paying £200/mth you would need to offer £1600.
Before entertaining this offer your IVA company are quite within their rights to do a final review of your income and expenditure. They need to check whether your remaining payments should be based on the current amount or be increased because your surplus income has recently gone up.
Your IVA company will guide you on this as different companies have different policies in this area. But ultimately to start the ball rolling you need to set out your stall with an offer based on what you believe are the remaining payments.