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.
im in an iva which was 19500 and pay £73 a month, there have also been £6500 plus of mispaid ppi put into it, if my sister offered £10000 in full and final settlement would it be accepted I have about 46 months left on it.
Hi Jerry
The amount required to settle your IVA is based on the number of months remaining multiplied by the amount you pay each month. Regardless of what has been paid into the IVA to date (from monthly payments or PPI or any other windfalls) you do not need to repay the total outstanding debt.
As such on the face of it your sister should not need to offer anything like £10k. I would be thinking more like £3400 (46 months remaining x £73). The offer should be no greater than this as this is all you would pay if you simply decided to carry on paying as normal until the end of the Arrangement.
I have 18 months left of an Iva I pay £145 per month. My daughter has offered to pay it off. Will this be it finished. I am due a lump sum pension next year can they still take it off me if the Iva was paid off now?
Hi Carrie
Once your IVA is settled with the lump sum and most importantly when you have your completion certificate (which could take 3 months from the time the lump sum is paid) any money you subsequently draw from your pension will be yours to keep.
You must NOT draw any money from your pension until you get your completion certificate. If you do it will be a windfall and will have to be paid into the IVA.
My husband is in an IVA he has recently been advised he is to be made redundant from his job. We have advised his IVA supervisor as legal required. At the same time his parents asked if they could help get this paid as this is all having a huge impact on his health as he is a recovering cancer patient and may strugle to get another job. Or worse with all this stress he is under his ilness may return.
His pyments are £275 per month and has 4 years to pay it alss states that he needs to re-mortgage our home and releases equity of £26,000.
If he is made redundant can we use this as full and final settlement, so the agreed amount of £43,000 would be paid to get rid of this IVA. His redundancy package is £41,000 less £3,300 if we offered them £37,000 would they accept this.
We just want it gone its cauing more stress and worry that they will force him to be bankrupt
Hi Lorraine
Under normal circumstances a redundancy payment received during an IVA is treated as a windfall. In other words the funds have to be paid into the IVA. Your husband would be allowed to keep the equivalent of 6 months take home pay to maintain your living expenses (and IVA payment) while he looks for a new job.
That said if the prospects of finding another job are slim (perhaps due to health or age reasons) it might be possible for the IVA company to agree with the creditors that the payment will be taken in full settlement of the IVA.
Given your husband’s condition I feel he would certainly have a case for this 2nd option. I think you should discuss it with the IVA company.