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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Hi,
That last question is similar to mine, I have only just started my Iva, it is still being processed. I wanted to know if there is a min time frame for when you pay it off. So if my dad gave me the money could I pay it off now? (Assuming I offered exactly what I would pay each month times amount of months left).
Regards
Hi Sharon
From what you have said I am not sure if your IVA has already been accepted and is now legally binding or not. If not and your Dad could offer a lump sum now I strongly recommend you put the breaks on your current proposal and change it to a full and final settlement one. This would allow your entire IVA to be paid with a single lump sum from your Dad without ever having to make any monthly payments at all.
If your IVA has already been agreed at the creditor’s meeting then you would need to speak to your IVA company about whether an early settlement offer would be allowed at this stage. Sometimes (as mad as it sounds) there is a clause in the IVA terms which says that offers for early settlement cannot be put forward until monthly payments have been made for a particular period of time (eg 6 or 12 months). Your IVA company will clarify this for you.
Hi James,
I have been struggling to make my monthly payments into my Iva for some time now and as a result have seriously considered selling my 50% share in my small business. This will of course leave me with no income at all but a substantial lump sum.
How could doing this affect my IVA? Would it be considered a windfall? If it is could they take every penny from the sale?
If that is the case could I potentially borrow the money from family/friends to pay it off early prior to selling the business without any fallback from my IVA company?
Hi Lex
The way you manage this will have a massive impact. I recommend strongly that you borrow money from friends and family to settle your IVA first. Once this has been done AND you have received your completion certificate you are then free to sell your share of your business and keep the funds you receive.
If you sell your business while you are in your IVA (before you receive a completion certificate) the funds you receive will certainly be considered a windfall and will have to be handed over to your IVA company in full.
Your IVA company are then allowed to deduct the full outstanding debt owed (less any payments already made) + their fees & costs + interest on the total original debt charged at 8% pa from the start of the IVA. As such you will end up paying back significantly more than you owed before the Arrangement started.
Hi James
I have 14 more payments to make to my IVA (it would have been 8 but I had to take a payment break a few years ago to purchase a car for work).
The payments are 437 per month and I am finding it more and more difficult to repay them. My daughter works for the emergency services and they have a Credit Union from which I could borrow the amount of my remaining payments and reduce my monthly outgoings significantly.
My question is, is my IVA Supervisor likely allow me to take out a loan to repay the remaining amount on my IVA so that I can settle it early?
Hi Anne
From what you have said your remaining monthly payments total £6000 on your IVA. Your IVA supervisor will probably be concerned about you borrowing this amount to make the settlement.
However could your daughter borrow on your behalf? If she could then you can go to your IVA company and tell them the money is being made available from her. They are likely to be comfortable about this. You could then pay her back once your IVA is completed.